Government gas comment for past week:
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To: wngm@tonto.eia.doe.gov (Weekly Natural Gas Market Update)
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To view the Weekly Market Update with graphs, go to eia.doe.gov.
A reported stock draw of 146 Bcf and the return of seasonal
temperatures in many areas of the country at mid week abruptly
ended a downward correction in futures prices. The December
futures contract lost $0.352 per MMBtu in its final day of trade.
By Friday, the January contract, which took over Wednesday,
turned in a record near-month high at $6.673 per MMBtu. At
the Henry Hub, cash prices ended the week at $6.60 per
MMBtu, as weather forecasts called for temperatures to drop
sharply in the Northeast beginning last Wednesday. Data for
the four cities monitored for this report appear to have
confirmed this forecasted shift (see Temperature graph and
table). Starting December 9, the National Weather Service
(NWS) 6-to-10-day forecast predicts below-normal
temperatures in the major gas-consuming areas of the Midwest
and normal temperatures elsewhere. Spot prices in the West
moderated early in the week but returned to previous levels as
low inventories prompted Pacific Gas and Electric to issue an
operational flow order on Wednesday to limit customer pulls.
The White House, IEA, Saudi Arabia, and Kuwait's willingness
to compensate for the 2-million plus barrels-per-day Iraq
withdrew from the world market Thursday kept crude oil prices
from spiking. The price of West Texas Intermediate closed at
$32.05 per barrel ($5.53 per MMBtu) last Friday comparedwith
the pre-Thanksgiving close of $36.15 ($6.23 per MMBtu).
Storage: A net 146 Bcf was taken out of storage in the week
ending November 24, 2000, the largest amount ever reported for
the last full week of November according to the American Gas
Association's (AGA) stock survey. This decrement left natural
gas stocks in the lower 48 states at 2,512 Bcf as estimated by
EIA, or 12.0 percent less than the 5-year (1995-1999) average.
In this particular week of the refill season, net storage
withdrawals have averaged about 54 Bcf over the previous 5
years (1995-99), according to AGA's storage estimates. The
Producing Region's withdrawals of 42 Bcf were proportionately
the largest drawdown with respect to each region's beginning
stock levels as of the previous Friday (November 17), leaving
stocks in that region at 18.6 percent below the 5-year average.
A considerable 91 Bcf draw in the East Region pulled stocks
slightly (5.3 percent) below the 5-year average, while the gap
below the 5-year average in the West widened to 30.6 percent
after a 13 Bcf draw. It is possible that stocks in the West
Region ended November at the lowest level recorded in the last
5 years by EIA.
Spot Prices: Spot prices slipped modestly during the first day
of trade after the Thanksgiving break, closing at $6.25 per
MMBtu at the Henry Hub and at $6.30 and $6.72 at the Chicago
and New York citygates. After taking a cue from futures prices
and reacting to comparatively cooler temperatures, spot prices
established seasonal highs at many market locations. Henry
Hub ended the week at $6.60, Chicago at $6.70, and New York
at $7.52. Representative spot prices for Canadian and out-of-
state supplies for California were $14.47 and $5.88 early in the
week and $16.28 and $6.40 by the end of the week. California
citygate prices went about $2.50 to $3.00 higher, reflecting the
effect of tight inventories. The Alliance Pipeline in Canada,
which will eventually improve the U.S. supply picture by 1.3
Bcf per day through enhanced deliveries from the Midwest to
New England, opened last Friday with no discernible impact on
prices.
Futures Prices: The December futures contract closed lower
Tuesday with a flurry of selling activity in the closing hours of
the contract. The January contract, opening as the near-month
contract on Wednesday, settled at $6.181 per MMBtu, 2.6 cents
lower than the previous day. Forecasts for cooler weather, the
announcement of the substantial pull on stocks, and continued
strong electric generation demand quickly caused markets to set
two successive near-month highs. By the end of the trading day
Friday, the January contract stood at $6.673 per MMBtu. On
the same day, the February and March contracts were at $6.533
and $6.043, respectively, at least 28.9 and 44.3 cents per
MMBtu higher than before Thanksgiving.
Summary: The close out of the December contract and a small
break in cold temperatures gave prices a brief respite until the
return of seasonal weather and the report of last week's sizeable
stockdraw. California prices are expected to continue high and
volatile, partially attributable to a low stock situation in the
region. |
