for week ending May xx, 2001 | Release date: May xx, 2001 | Previous weeks
Overview:
Thursday, April 1, 2004 (next release 2:00 p.m. on April 8)
Natural
gas spot prices surged upward in the past three days, bringing price levels
significantly above those of a week ago (Wednesday, March 24) in all regional
markets. At the Henry Hub, the price for
spot gas increased $0.28 per MMBtu on the week
(Wednesday-Wednesday, March 24-31), or about 5 percent, trading yesterday at
$5.63. Taking over as the near-month
futures contract on Tuesday, March 30, the NYMEX contract for May delivery moved
up sharply, ending trading yesterday at its highest-ever settlement price of
$5.933 per MMBtu.
EIA reported that natural gas inventories were 1,014 Bcf
as of Friday, March 26, which is 7.7 percent less than the preceding 5-year
average for the week. Despite
anticipation of yesterday's OPEC decision to curtail oil production by up to 1
million barrels per day, the spot price for West Texas Intermediate crude oil
declined on four of the five trading days of the week, trading yesterday at
$35.75 ($6.16 per MMBtu), down $1.31 per barrel
($0.23 per MMBtu) on the week.
After price declines lasting more than a week, the
spot market launched a run of three straight days of sharply rising prices on
Monday. Prices have risen consistently
for three days at virtually every market location in the nation. Net increases ranged from a quarter to nearly
a half-dollar per MMBtu. Increases tended to be largest in the
Northeast and Midcontinent, and smallest in the
Rockies. Yesterday (Wednesday, March
31), the average price at all Northeast locations was $6.18 per MMBtu, an increase of 40 cents over last Wednesday's
average. Average prices in the Midcontinent, West Texas, and at California locations moved
above $5 per MMBtu to $5.36, $5.13, and $5.26, respectively. Modest weather-related swing demand in some
areas of the nation provided some support for cash prices. Temperatures over
most of the East Coast were cooler than normal beginning over the weekend,
while heat in the Southwest and West Texas generated demand for space-cooling,
requiring some increase in gas-fired electricity generation. In California, the heat coupled with some
power plant outages caused the state's Independent Systems Operator to call a
Stage One power alert on Monday afternoon.
Nonetheless, few industry observers believed that increased industrial
and weather loads were sufficient to account for the sharp and steady price
increases. Two other factors cited were
the recent strength in the futures market and the perception that many industry
participants are aggressively refilling storage inventories.
On the NYMEX, the April contract expired on Monday,
March 29, with a 3-cent loss, after spending the day trading within a
less-than-6-cent range, settling at $5.365 per MMBtu. This is just 2.6 cents less than its
settlement price on its first day as the near-month contract on February
26. Since becoming the near-month
contract on Tuesday, the May contract has surged upward by $0.451, settling
yesterday at $5.933 per MMBtu, its highest settlement
price thus far in its 71-month life. Its
price increase on Tuesday was likely influenced by increasing futures prices
for crude oil and petroleum products, but it continued to rise yesterday as
these other commodities were falling.
The May contract may be deriving some support from near-term temperature
forecasts. The latest from the National
Weather Service calls for below normal temperatures for nearly the entire
nation east of the Rockies, and above normal temperatures west of the Rockies,
through the middle of April.
Recent Natural Gas
Market Data
Estimated Average Wellhead Prices |
||||||
|
Sep-03 |
Oct-03 |
Nov-03 |
Dec-03 |
Jan-04 |
Feb-04 |
Price ($ 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. |
Working
gas inventories were 1,014 Bcf as of Friday, March
26, according to EIA's Weekly Natural Gas Storage Report.
This is 84 Bcf, or 7.7 percent, less than the
preceding 5-year (1999-2003) average for the week (See Storage Figure). For the second week in a row, implied net
withdrawals in the East region were partially offset by implied net injections
in the Producing and West regions. The
resulting total implied net withdrawal for the week of 18 Bcf
is about 30 percent smaller than the 5-year average net inventory change for
the week. Significantly
warmer-than-normal temperatures across roughly three-quarters of the nation (See Temperature Map)
(See Deviations Map) reduced demand for space heating,
allowing net injections into storage in the Producing and West regions. Additionally, the recent significant positive spread between futures prices and the
Henry Hub spot price likely provided additional incentive for storage
injections. On the other hand,
the cooler-than-normal temperatures that prevailed in the Southeast, parts of
New England, and the upper Midwest maintained some space-heating demand in
these areas, likely influencing withdrawals in East region storage facilities.
Other
Market Trends:
Federal Government Agencies to Study
Artificial Reef Effect in Deep Water Gulf of Mexico. The Minerals Management Service (MMS), in partnership
with the National Oceanic and Atmospheric Administration's Office of Ocean Exploration
(NOAA OE), awarded a contract to investigate the long-term effect of manmade
structures on the deep sea, and conversely, the effect of the environment on
those structures. The contract was awarded under the auspices of the
National Oceanographic Partnership Program (NOPP), with MMS providing $350,000
towards research costs and NOAA OE providing 18 days of ship time, a deep
submergence remotely operated vehicle, and personnel for both. The study is intended to examine the basic
question of whether manmade artificial structures or objects such as shipwrecks
or offshore petroleum platforms can function as artificial reefs in deep
water. Although there is not yet a
complete understanding of how artificial reefs function on the continental
shelf, particularly in the photic zone above 100
meters, it is generally accepted that artificial reefs can serve a positive
function by the creation of new hard-bottom habitat in areas where hard-bottom
is naturally lacking. This can be
important in the Gulf of Mexico, which has a natural bottom that is a flat
plain, largely comprised of mud, clay, and sand with very little natural rock
bottom and reef habitat. Without
artificial reefs, fish and marine life typically would become widely
dispersed. In the Gulf of Mexico
converting offshore oil and gas structures into artificial reefs on the
continental shelf has been accepted as a benefit to fisheries; 49 structures
have been converted from a total of 383 structure removals between 1999 and
June 2002. However, in the deeper waters beyond the shelf, additional
information is needed to evaluate the significance of a deep-sea artificial
reef effect.
Summary:
Spot and futures prices moved up strongly in the
past few days. The futures contract for
May delivery reached a record-high settlement price on Wednesday, March 31
($5.933 per MMBtu), while regional average spot
prices exceeded $5 for all regions outside of the Rockies, especially in the
Northeast, where spot prices exceeded $6.
Working gas inventories towards the end of the heating season remain
more than 1,000 Bcf.