for week ending April 7, 2004 | Release date: April 8, 2004 | Previous weeks
Overview:
Thursday, April 8, 2004 (next release 2:00 p.m. on April 15)
Natural
gas spot prices have increased since Wednesday, March 31, at most market
locations in the Lower 48 States. For
the week (Wednesday-Wednesday), prices at the Henry Hub increased 13 cents or
about 2 percent to $5.76 per MMBtu. Yesterday (Wednesday, April 7), the price of
the NYMEX futures contract for May delivery at the Henry Hub settled at $5.872
per MMBtu, decreasing roughly 6 cents or 1 percent
since last Wednesday. Natural gas in
storage increased to 1,034 Bcf as of April 2, which
is less than 6 percent below the 5-year average. The spot price for West Texas Intermediate
(WTI) crude oil climbed 53 cents per barrel or about 1.5 percent since last
Wednesday, to $36.28 per barrel or $6.255 per MMBtu.
Spot
gas prices increased at nearly all market locations in the Lower 48 States
since last Wednesday, March 31, climbing up to 59 cents per MMBtu.
Factors contributing to the run-up in natural gas prices include a lingering
chill in most of the Northeast, Mid-Atlantic and Midwest regions, climbing
crude oil prices, and storage injection demand. The largest increases occurred
principally west of the Rocky Mountains, where prices climbed between 23 and 59
cents per MMBtu, increasing between 4 and 11
percent. A couple of isolated markets in
Texas also had increases of 24 cents per MMBtu or
nearly 5 percent. Elsewhere in the Lower
48 States, price hikes were significantly less pronounced as prices climbed
less than 15 cents per MMBtu or 3 percent since last
Wednesday, March 31. With these price
hikes, prices at most market locations now exceed last year's level between 10
and 22 percent. For example, as of
Wednesday, April 7, prices at the Henry Hub exceeded last year's level by about
19 percent.
At
the NYMEX, the price of the futures contract for May delivery at the Henry Hub
decreased about 6 cents or 1 percent since last Wednesday (March 31). Similarly, the price of the futures contracts
for delivery through the other remaining refill season months (June-October)
also decreased up to 3 cents per MMBtu or less than 1
percent. The prices of the futures
contracts for each month through the remaining months of 2004 exceed the Henry
Hub spot price by 11 to 56 cents per MMbtu. With the futures strip through the remaining
months of 2004 trading at a significant premium to the Henry Hub spot price,
suppliers have strong economic incentives to inject gas into storage.
Recent Natural Gas
Market Data
Estimated Average Wellhead Prices |
||||||
|
Oct-03 |
Nov-03 |
Dec-03 |
Jan-04 |
Feb-04 |
Mar-04 |
Price ($ per Mcf) |
4.43 |
4.34 |
5.08 |
5.53 |
5.15 |
4.97 |
Price ($ per MMBtu) |
4.31 |
4.22 |
4.94 |
5.38 |
5.01 |
4.83 |
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 in storage was 1,034 Bcf as of Friday, April 2,
2004, according to the EIA Weekly Natural Gas Storage Report. This is about 6 percent below the 5-year
average for the report week and 346 Bcf above the
level for the same week last year. (See
Storage Figure). The implied net injection during the report
week was 20 Bcf, which marks the first overall net
injection recorded in 2004. This is a
marked difference from both the 5-year average withdrawal of 1 Bcf for the week and the withdrawal of 8 Bcf reported for the same week last year. Futures prices trading at a significant
premium to the Henry Hub spot price during most of the report week and warmer
than normal temperatures through most of the Lower 48 States likely contributed
to the net injections of natural gas into storage. (See Temperature Map)
(See Deviations Map)
Other
Market Trends:
Canada Looks to Step Up Coalbed Methane Production: The Albertan
Government has begun a series of public meetings with stakeholders to examine
issues related to development of Canada's significant coalbed
methane (CBM) resources. CBM is natural gas or methane that is found in coal
seams. The gas is attached to coal, instead of being trapped in the pores of
rock as in conventional resources. The National Energy Board of Canada estimates up to 80 trillion cubic feet (Tcf)
of gas in the country's coal seams is recoverable. Coalbed
methane production has increased significantly in the United States in recent
years. U.S. production in 2002 totaled
1.6 Tcf, 8 percent of total dry gas production, up
more than 1 Tcf in 10 years. Coalbed production
in Canada is still in its infancy with only about 13 Bcf
produced last year, according to a recent report by Lehman Brothers. The
report, Insight on Canadian CBM,
notes that CBM opportunities are believed to have the potential possibly to
double proved conventional natural gas reserves of 42 Tcf
in Alberta and eventually contribute 3 Bcf/d or about
15 percent of total Canadian natural gas production of about 16.4 Bcf/d. With U.S. natural gas imports from Canada of
approximately 10.6 Bcf/day, the development of CBM
resources in Canada could pay a significant role in meeting Lower 48 demand in
the future. To date, most of CBM development has targeted the Horseshoe Canyon
in South-Central Alberta, according to the Lehman report. Meetings with
stakeholders and the public are being held through April with the goal of
submitting a final report on improvements to Canada's fiscal and tax regimes
for CBM development by November 2004.
Pemex Chief
Announces Production Increase in 2003:
Mexico's national oil and gas company Pemex increased
natural gas production in 2003 to approximately 4.5 billion cubic feet (Bcf) per day, the company said. In a statement released
Friday, April 2, Pemex said that the 1.7 percent
year-over-year increase reversed a 7.7 percent decline since 1998, in part
owing to decreased output from its prolific Cantarell
field. Speaking at an industry conference, Pemex
General Director Raul Munoz said that Pemex now has a
portfolio of 95 exploration and production projects worth over $160 billion.
Munoz said the company now intends to exploit prospects in Mexico's part of the
offshore Gulf of Mexico. Despite efforts to develop its natural gas reserves,
Mexico has been a net importer of U.S. supplies for several years as power
generation demand has grown. Mexico imported roughly 900 MMcf
per day from the United States in 2003 to supplement its domestic production,
according to the EIA's Natural Gas Monthly. Mexican President Vicente Fox has voiced
support for increasing production through private investment in the upstream
oil and gas industry. However, members of the opposition party now controlling
Congress have objected to a proposed constitutional amendment that would allow
private investment and have indicated intent to challenge "multiple service
contracts" (MSCs) recently awarded by Pemex to partner private firms. The MSCs
are meant to comply with the country's constitution, which prohibits foreign
ownership of oil and gas resources, by making private companies responsible for
100 percent of the financing and operations associated with a project while
mandating that the natural gas produced in a field will remain the property of Pemex.
Summary:
Natural
gas prices increased at most market locations since Wednesday, March 31, amid
lingering cool temperatures and rising oil prices. However, prices at the NYMEX futures market
declined from last week's level.
Nevertheless, prices in both the spot and futures markets now exceed
last year's levels at this time. Working
gas in storage increased to 1,034 Bcf, which is
nearly 6 percent below the 5-year average.