Natural Gas

Overview: Thursday, April 22, 2004 (next release 2:00 p.m. on April 29)

Since Wednesday, April 14, natural gas spot prices have decreased at virtually all market locations in the Lower 48 States. For the week (Wednesday-Wednesday), prices at the Henry Hub decreased 21 cents or about 4 percent to $5.52 per MMBtu. Yesterday (April 21), the price of the NYMEX futures contract for May delivery at the Henry Hub settled at $5.582 per MMBtu, decreasing roughly 16 cents or 3 percent since last Wednesday. Natural gas in storage was 1,077 Bcf as of April 16, which is 6 percent below the 5-year average. The spot price for West Texas Intermediate (WTI) crude oil was relatively unchanged, falling $0.01 per barrel on the week to $36.61 per barrel or $6.312 per MMBtu.

Prices:

Moderating temperatures led to price declines of at least 10 cents per MMBtu at most market locations in the Lower 48 States since last Wednesday, April 14. The steepest declines occurred principally in the Northeast region, where prices fell more than 30 cents per MMBtu at most markets. Prices at the New York citygate fell 34 cents or roughly 5 percent to $5.98 per MMBtu—the largest decline in the Lower 48 States over the period. Outside the Northeast region, price declines were more modest with decreases ranging between 10 and 25 cents per MMBtu at most locations. As of Wednesday, April 21, prices at most market locations outside of the Rockies were within 5 percent of last year's levels.

At the NYMEX, the price of the futures contract for May delivery at the Henry Hub decreased about 16 cents per MMBtu or 3 percent since last Wednesday to $5.582 per MMBtu. The prices of the futures contracts for delivery in each of the following 5 months similarly fell about 15 to 17 cents or about 3 percent from last Wednesday's level. The prices of the futures contracts for each month through the remaining months of 2004 exceed the Henry Hub spot price by 6 to 60 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

Storage:

Working gas in storage was 1,077 Bcf as of Friday, April 16, 2004, according to the EIA Weekly Natural Gas Storage Report. (See Storage Figure) This is about 6 percent less than the 5-year average for the report week and 375 Bcf more than the level for the same week last year. The implied net injection during the report week was 28 Bcf. This is about 26 percent below the 5-year average net addition of 38 Bcf for the week and contrasts to an injection of 60 Bcf reported for the same week last year. Lingering cool temperatures during the week ended April 17 likely contributed to the lower-than-average rate of injections as temperatures in the Northeast and Midwest regions were close to normal and temperatures elsewhere in the Lower 48 States were significantly cooler than normal. Temperatures for the week ended April 17 were significantly cooler than last year at this time in most of the Lower 48 States. (See Temperature Map) (See Deviations Map)

Other Market Trends:

FERC Clarifies Standards of Conduct Guidelines for Natural Gas and Electric Transactions. On April 14, 2004, the Federal Energy Regulatory Commission (FERC) clarified its standards of conduct that govern the relationship between transmitting providers and their energy affiliates. In response to petitions for rehearing and clarification of its November 2003 rule, FERC reaffirmed the need for the rule, noting that it protects customers in an environment where robust competition provides the economic incentives that may tempt a transmission provider to give its affiliates unduly preferential treatment. The Commission is extending until September 1, 2004, the date for full implementation of the standards of conduct. FERC upheld the rule's "no-conduit" provisions that allow "shared" employees, such as officers and directors, to receive information necessary to maintain the operations of the transmission system The rule will now expressly state that corporate governance information may be given to officers and directors of the transmission provider and the energy affiliate, as long as these employees do not act as a conduit for sharing information. FERC clarified a number of other provisions of the rule, including refining the definition of an energy affiliate that "engages in" or is "involved in" transmission transactions in response to public comments that the terms are vague. The term,"engaged in" means the affiliate holds or requests transmission capacity on a transmission provider as a shipper or customer or buys or sells transmission capacity in the secondary capacity market. FERC clarified the term, "involved in," to mean an entity that is acting as agent, asset manager, broker, or in some fashion, managing, controlling or aggregating capacity on behalf of transmission customers or shippers.

Summary:

Moderating temperatures reduced natural gas demand in most parts of the country, contributing to lower spot prices at most market locations. Prices fell at the NYMEX futures market from last week's level. Working gas in storage increased to 1,077 Bcf, which is 6 percent below the 5-year average.

Natural Gas Summary from the Short-Term Energy Outlook