Overview:  Thursday, March 4, 2004 (next release 2:00 p.m. on March 11)

Despite moderating temperatures across the northern tier of the Lower 48 States, natural gas spot prices have increased since Wednesday, February 25, at most market locations in the Lower 48 States.  For the week (Wednesday-Wednesday), prices at the Henry Hub increased 24 cents or about 5 percent to $5.34 per MMBtu.  Yesterday (Wednesday, March 3), the price of the NYMEX futures contract for April delivery at the Henry Hub settled at $5.375 per MMBtu, increasing roughly 15 cents or 3 percent since last Wednesday.  Natural gas in storage decreased to 1,171 Bcf as of February 27, which is about 11 percent below the 5-year average.  The spot price for West Texas Intermediate (WTI) crude oil fell $1.48 per barrel or about 4 percent since last Wednesday, falling to $34.62 per barrel or $6.172 per MMBtu.

 

 

Prices:

Despite warmer than normal temperatures in most of the principal gas-consuming areas of the Lower 48 States, gas prices have increased since last Wednesday, February 25.  Prices increased following the larger-than-average withdrawal from working gas storage reported last Thursday.  A contributing factor to the run-up in natural gas prices could be climbing crude oil prices, which rallied late last week, climbing $1.40 per barrel or 24 cents per MMBtu in trading on Friday, February 27, and Monday, March 1.  Natural gas price increases since last Wednesday, February 25, ranged between 2 and 53 cents at most market locations.  The largest increases occurred in the California and Rocky Mountains regions, where prices climbed more than 45 cents per MMBtu at nearly all locations.  East of the Rockies, price increases were less pronounced.  Price increases ranged between 20 and 45 cents per MMBtu at most markets in the central regions of the Lower 48 States, including Texas, Alabama, Louisiana, and the Midwest and Midcontinent regions.  In the Northeast, prices eked out narrow gains of less than dime at most market locations.  Prices at the New York citygate and the Algonquin citygate, which serves most of the New England region, averaged $5.75 and $5.85 respectively on Wednesday, March 3, which reflect gains of 2 and 4 cents per MMBtu since last Wednesday-- the smallest increases in the Lower 48 States.  Despite last week’s increases, prices remain well below the highs recorded in mid-January 2004, and have fallen roughly 10 percent at most market locations since the start of the new year.  Furthermore, spot prices are more than 40 percent below the level for last year at this time at nearly all market locations.

 

 

At the NYMEX, the price of the futures contract for April delivery at the Henry Hub increased about 15 cents or 3 percent since last Wednesday (February 25).  Similarly, the price of the futures contracts for delivery through the refill season months (April-October) also increased about 20 cents per MMBtu or 4 percent.  As in the spot markets, the price of the near-month contract is significantly lower than last year at this time. Yesterday, March 3, the April contract settled lower than last year’s level by about $1.79 per MMBtu or 25 percent.

  

Estimated Average Wellhead Prices
	Sep-03	Oct-03	Nov-03	Dec-03	Jan-04	Feb-04
Price ($ per Mcf)	4.58	4.43	4.34	5.08	5.53	5.15
Price ($ per MMBtu)	4.45	4.31	4.22	4.94	5.38	5.01
Note:  The price data in this table are a pre-release of the average wellhead price that will be published in forthcoming issues of the Natural Gas Monthly.  Prices were converted from $ per Mcf to $ per MMBtu using an average heat content of 1,027 Btu per cubic foot as published in Table A4 of the Annual Energy Review 2002.
Source:  Energy Information Administration, Office of Oil and Gas.

 

Storage:

Working gas in storage was 1,171 Bcf as of Friday, February 27, 2004, according to the EIA Weekly Natural Gas Storage Report. (See Storage Figure)  This is about 11 percent below the 5-year average for the report week and 333 Bcf above the level last year for the same week.  The implied net withdrawal during the report week was 96 Bcf, which is 12 percent below than the 5-year average withdrawal of 109 Bcf for the week, and about 45 percent less than the withdrawal of 176 Bcf reported for the same week last year.  Warmer-than-normal temperatures across most of the Lower 48 States likely contributed to the smaller-than-normal withdrawals of natural gas from storage. (See Temperature Map) (See Deviations Map)

 

 

Other Market Trends:

EIA Updates Web Site on Retail Gas Competition:  The Energy Information Administration (EIA) has updated the status of natural gas industry restructuring in each state as of December 2003, focusing on the residential customer class (Natural Gas Restructuring). Enrollment in existing "customer choice" programs increased by less than 1 percent (32,961) in 2003, although the number of customers eligible for these programs increased by nearly 4 percent, or 1.2 million. In total, more than 30 million of the approximately 60 million residential gas customers in the United States have access to choice programs and more than 4 million are participating (13 percent of eligible), with the largest numbers in Georgia (1.4 million, 100 percent of eligible), Ohio (1.3 million, 43 percent of eligible), and New York (295,000, 7 percent of eligible). Overall, however, sharply higher prices for natural gas in 2003 and increased price variability seem to have dampened consumer interest in alternative supply options and reduced the number of suppliers interested in serving the residential market. Since December 2001, the number of marketers authorized to serve residential customers has dropped from 165 to 121 and the number of marketers actively serving residential customers has dropped from 159 to 92 as of December 2003.

 

Summary:

Natural gas prices increased at most market locations since Wednesday, February 25, despite milder temperatures in the Lower 48 States.  Likewise prices climbed at the NYMEX futures market from last week’s level.  However, prices in both the spot and futures markets remain well below last year’s level at this time.  Working gas in storage decreased to 1,171 Bcf, which is 11 percent below the 5-year average.  

 

Natural Gas Summary from the Short-Term Energy Outlook