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Overview:
Thursday, April 15, 2004 (next release 2:00 p.m. on April 22) An early spring chill in the Northeast kept natural gas
spot prices firm this week until yesterday (April 14), when warmer temperatures
resulted in sharp price declines at most trading locations for the day and
moderately lower prices on the week (Wednesday-Wednesday, April 7-14). The
Henry Hub spot price declined 3 cents per MMBtu on
the week to $5.73. After climbing above $6.00 per MMBtu
earlier in the week, the NYMEX futures contract for May delivery at the Henry
Hub dropped in the last two trading sessions to yesterday’s closing price of
$5.744, which represents a net decline of 13 cents per MMBtu
on the week. There was a second consecutive week of injections into storage
with stocks as of Friday, April 9, at 1,049 Bcf,
which is 5.2 percent below the 5-year average. The spot price for West Texas
Intermediate (WTI) crude oil rose 34 cents per barrel on the week to
yesterday’s closing price of $36.62 per barrel, or $6.31 per MMBtu. Prices dropped 10 cents per MMBtu
or less at nearly all market locations since last Wednesday, April 7, as
moderating temperatures confirmed the end of the heating season. Nevertheless,
prices remained relatively elevated through much of the week as seasonal
nuclear plant outages for refueling and high crude oil prices continue to
support energy prices in general. The Henry Hub spot price reached its highest
level since late January at $5.92 per MMBtu on
Tuesday, April 13, only to fall 19 cents in trading yesterday for a net decline
on the week of 3 cents. Similar declines of a penny to 6 cents per MMBtu occurred throughout most producing areas in the
Southwest and Mid-continent. Meanwhile, the largest declines in the Lower 48
States since last Wednesday occurred in the Rockies, where relatively warm
weather resulted in prices falling more than 20 cents at selected locations.
The spot price at the Cheyenne Hub in Wyoming fell 30 cents per MMBtu to $4.81. Prices fell between 1 and 2 cents per MMBtu at locations in California. The largest price drop in the Northeast
occurred for deliveries off Algonquin Gas Transmission, which serves the Boston
area, as well as points farther south in the Northeast. The Algonquin price
fell 10 cents per MMBtu, but remains the highest in
the country at $6.33 per MMBtu, which is a 60-cent
premium to the Henry Hub price. Owing to the lingering cooler-than-normal
temperatures this spring and relatively steep prices for alternative fuels,
natural gas prices remain significantly higher than last year at this
time. Prices at many market locations
are more than 10 percent greater than last year. At the Henry Hub this year’s price level
exceeds last year’s by 8.5 percent. At the NYMEX, the price of the futures contract for
May delivery at the Henry Hub declined by about 13 cents since Wednesday, April
7, to settle at $5.744 per MMBtu on Wednesday, April
14. As was the case with spot prices,
the near-month contract price reached its highest level since late January
earlier this week, before dropping in recent trading because of expected soft
market conditions owing to adequate storage levels and the loss of heating
demand. At $5.744 per MMBtu, the May contract is
priced 62 cents, or 12 percent, higher than the expiration price of the May
2003 contract. In trading this week, the June contract declined nearly 12
cents, or 2 percent, to $5.834 per MMBtu. The
12-month strip, or the average price for contracts over the next year, closed
yesterday at $5.987, a decline of 7 cents on the week. Currently, the highest
priced contract in the 12-month strip is the January 2005 contract, which
closed yesterday at $6.386 per MMBtu, a 66-cent
premium to the spot Henry Hub price, providing a strong incentive for industry
to store gas for next winter. Recent Natural Gas
Market Data
Estimated
working gas in underground storage was 1,049 Bcf as
of April 9, which is 5.2 percent below the 5-year average inventory level for
the report week, according to EIA’s Weekly Natural
Gas Storage Report (See Storage
Figure).
The implied net change in inventories was an addition of 15 Bcf,
which is the second net injection this spring. This implied net injection is
significantly larger than the 5-year average injection of 9 Bcf
and a net difference of 61 Bcf from last year’s
withdrawal of 46 Bcf. Although temperatures in the
Northeast were slightly cooler than normal, seasonally mild temperatures
throughout the rest of the country likely generated little weather-sensitive
demand, allowing for the continued injections. During the report week, the
weather for the country as a whole was about 5.7 percent warmer than normal, as
measured by heating degree days (HDDs) for the week
ending April 10, according to the National Weather Service (See Temperature Map)
(See Deviations Map). Temperatures in major consuming market areas
in the Midwest were generally mild. For example, in the East North Central
Census region, which includes Chicago, HDDs
numbered 1.4 percent below normal. Other
Market Trends: Bahamas to
Florida Pipeline Projects Advance: Tractebel North America and AES on Tuesday, April 14,
received approval from the Florida government to construct pipelines from
proposed liquefied natural gas (LNG) terminals in the Bahamas to Florida. The 42-mile Tractebel
pipeline proposal, Calypso Pipeline, would have the capacity to transport up to
807 million cubic feet a day (MMcf/d) from an LNG
terminal in Freeport, Grand Bahamas, to a connection with Florida Gas
Transmission in Broward County, Florida. AES’s Ocean
Express pipeline would transport 842 MMcf/d to
Florida from Ocean Cay, an existing 90-acre man-made industrial island in the
Bahamas. Florida Governor Jeb Bush and the Cabinet
voted to grant Sovereign Submerged Lands Easements and approve issuance of
permits by the Florida Department of Environmental Protection. Both projects
have received final approvals from the Federal Energy Regulatory Commission
(FERC) and “approvals in principle” from the Bahamian government. However, both
projects await final approval from the Bahamas Environment, Science and
Technology Commission for their environmental impact statements. Planning for a
third pipeline project to move gas to Florida from the Bahamas, El Paso’s
Seafarer Project, also advanced this week with the announcement that FPL Group
Resources, an affiliate of Florida Power and Light Company, has agreed to
contract for 800,000 MMBtu of capacity on the line.
El Paso, which lags behind Tractebel and AES in
gaining regulatory approval for the project, said that it has requested to use FERC’s new pre-filing process. The process allows project
developers to work with FERC to address environmental issues and consult with
other permitting agencies before the formal filing of an application. Natural
Gas Summary from the Short-Term Energy
Outlook: EIA
projects that natural gas prices will remain relatively high during the storage
refill season (April through October) and the rest of 2004. Wellhead prices are
expected to average $4.87 per MMBtu in April and May,
$4.71 from June through October, and $5.12 for November and December (Short-Term
Energy Outlook, April 2004). Spot prices during the
storage refill months will likely average $5.23 per MMBtu,
virtually the same as the average price ($5.22) this past heating season.
Overall in 2004, spot prices are expected to average $5.31 per MMBtu, slightly less than the 2003 price ($5.35), while
wellhead prices will average about $4.90. In 2005, natural gas spot prices will
likely average about $5.25 per MMBtu, under the
assumption that domestic supply can continue to grow by about 1 percent per
year. Total available supply (including imports and storage inventories) is
expected to increase to 22.31 Tcf in 2004 compared
with 21.78 Tcf in 2003. Storage stocks at the end of
the traditional heating season (March 31) were about 6 percent less than the
5-year average but nearly 50 percent more than year-earlier levels. Natural
gas production is estimated to have increased by approximately 0.6 percent in
2003. Production is expected to continue to rise slightly through 2005, as
natural gas well completions, which totaled an estimated 20,000 in 2003,
continue to grow to between 22,000 and 23,000 wells per year over the next 2
years. Natural gas demand is expected to increase by about 2.4 percent in 2004,
owing to expected growth in the economy and an overall increase in fuel oil
prices relative to average natural gas prices. In 2005, demand is also expected
to increase as the economy continues to expand, although the growth rate slows
to 0.6 percent because of expected reductions in weather-related demand in the
first quarter of 2005 relative to the first quarter of 2004 and relatively
lower fuel oil prices.
Source: Energy Information Administration, Short-Term
Energy Outlook, April 2004. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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