Overview

Lower prices and a report of another considerable net injection to stocks were featured in last week’s gas markets. As of Friday, May 11, 2001, the spot price of natural gas at the Henry Hub dropped $0.24 from the previous Friday to $4.25 per MMBtu.  The NYMEX price of natural gas for June delivery at the Henry Hub declined $0.212 for the week to $4.278 per MMBtu.  A record-setting 108 Bcf was added to natural gas stocks for the week ended May 4, 2001. The demand for cooling is still somewhat limited as mild temperatures prevailed around most of the country. (See Temperature Map) (See Deviation from Normal Temperatures Map)

Prices

Mid-week prices were at the lowest level since early August. Even with an end-of-the-week influence from the futures market that caused a slight upturn, spot prices at the major supply hubs were $0.25 to $0.65 cents per MMBtu lower on a week-to-week basis with Katy, Texas ending at $4.23; the Henry Hub, Louisiana at $4.25; Midcon, Oklahoma at $4.11; and Opal, Wyoming at $3.30. Prices at the Chicago and New York citygates were lower as well, registering $4.35 and $4.65 at week’s end, off a respective $0.27 and $0.20 per MMBtu for the week.  SoCal provided the only exception to the generally lower trend as demand increased because of warmer temperatures.  Natural gas prices receded before temperatures did, though.  The effect of unscheduled maintenance on the PG&E Gas Transmission system was imperceptible to PG&E’s large-volume purchasers.  By Friday, the PG&E customers were paying $3.51 less at $4.18 while SoCal’s citygate price was only $0.47 lower at $11.92.

 

On the NYMEX futures market, the price for the near-month (June) contract was generally lower even after some position-covering the last two days of the week.  The June contract ended the week at $4.278 per MMBtu, down $0.212 from the previous Friday and $0.589 below the opening prices as the near-month contract on April 27.  All forward months were down by comparable amounts with prices ranging from a low of $4.350 in July to a high of $4.797 in January.  These prices are expected to induce further injections to storage since prices for a future month delivery exceed the preceding month by the 2 to 3 cents per MMBtu required to cover monthly storage costs.

 

Spot Prices ($ per MMBTU)-Selected Trading Centers	Mon. 5/7	Tues. 5/8	Wed. 5/9	Thur. 5/10	Fri.   5/11
Henry Hub	4.32	4.23	4.15	4.17	4.25
New York citygates	4.69	4.61	4.52	4.65	4.65
Chicago citygates	4.44	4.35	4.23	4.25	4.35
Southern CA (SOCAL)	12.73	12.57	12.43	12.34	11.92
Futures (Daily Settlement, $MMBTU)
Near-Month (June)	4.239	4.279	4.202	4.348	4.278
July	4.314	4.353	4.273	4.414	4.350
Source: Financial Time Energy, Gas Daily

 

Storage

Net injections reported by the American Gas Association of 108 Bcf for the 7-day period ending May 4, 2001, were by far the largest total for the week in the 8-year history of the data.  Previously, net additions have been as low as 46 Bcf (1997) and as high as 82 Bcf (1994) for the week with a 6-year (1995-2000) average of 59 Bcf.  All regions reported a record fill with the West region exceeding its average injection rate of 7 Bcf by 100 percent.  The East and Producing regions were 68 percent and 81 percent above their respective averages of 35 Bcf and 19 Bcf.   With net storage injections for April estimated at 267 Bcf, this year’s refill season (April through October) is off to its best start in the 25 years that EIA has collected these data.

 

All Volumes in BCF	Current Stocks (Fri, 5/4)	Estimated 6-Year (1995-2000) Average	Percent Difference from 6 Year Average	Net Change from Last Week	One-Week Prior Stocks (Fri, 4/27)
East Region	554	643	-13.9%	60	494
West Region	172	213	-19.1%	14	158
Producing Region	337	412	-18.1%	34	303
Total Lower 48	1063	1,268	-16.2%	108	955
Note:  net change data are estimates published by AGA on Wednesday of each week.  All stock-level Figures are EIA estimates based on EIA monthly survey data and weekly AGA net-change estimates.  Column sums may differ from Totals because of independent rounding.

 

 

Other Market Trends

Reports of possible fuel switching have circulated as the price of natural gas has declined and the price of crude oil has stabilized in the $26 to $28 per barrel range, closing at $26.60 ($4.93 per MMBtu) on May 11.  As an illustration of this differential, the spot prices for No. 2 heating oil on the U.S. Gulf Coast and the New York Harbor was the equivalent of $5.36 and $5.48 per MMBtu, respectively, according to Reuters News Service.  The comparable prices for natural gas were $4.25 (Henry Hub, Louisiana) and $4.65 (New York citygates).  According to the same source, the price for low sulfur No. 6 residual fuel, another natural gas alternative, is now just 40 cents lower than natural gas in New York City.

 

Summary

Another record-setting injection to storage was reported last week as suppliers took advantage of lower prices, particularly in comparison to expected future prices.  However, higher demand resulting from the onset of the cooling season and from fuel switching may slow the pace of injections and price declines in the near future.