goverment weekly gas commentary:
From: Antoinette.Farmer@eia.doe.gov (Farmer, Antoinette)
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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.
Because of the federal holiday on Monday, December 25, 2000, the next issue of
the Weekly Market Update will be published on Friday, December 22nd.
Variability was the order of the day for spot prices at the Henry Hub
last week. After beginning the week with spot prices reaching
double-digit highs of $10.17 per MMBtu, prices dropped sharply to
$7.52 per MMBtu by Thursday, then gained over $0.30 to end
Friday at $7.83. On the NYMEX, the January futures contract
began the week $0.829 above the previous Friday's record ($8.584)
to set yet another record settlement price at $9.413 per MMBtu.
The January contract fell precipitously to settle at $7.413 per
MMBtu on Thursday, only to bounce back to $8.396 on Friday
upon release of the National Weather Service (NWS) revised
forecast calling for lower-than-normal temperatures for much of the
United States during the first 3 months of next year. The Midwest
experienced some of the heating season's lowest temperatures along
with significant snow falls early last week. This weather pattern
stalled west of the Appalachian Mountains, and prices at spot
markets in Pennsylvania, New York, and New England moved
down from Monday's $10.00 to $12.00 highs to $8.40 to $8.80 at
the week's end. In California, natural gas markets began the week
with reports of some truly remarkable prices that exceeded $59.00
per MMBtu in the southern part of the state, but ended the week at
still high but much-reduced levels close to $17.00 per MMBtu.
With Iraq announcing that it would again ramp up oil exports, the
price of West Texas Intermediate crude oil remained below $29.00
per barrel most days last week, trading Friday at $28.90 or about
$4.98 per MMBtu.
Storage: The American Gas Association (AGA) estimated that 158
Bcf was withdrawn from underground storage during the week
ended Friday, December 8. This is one of the largest weekly
withdrawals in December since 1990 and puts withdrawal activity
on pace to eclipse the previous 5-year high for the month of 575 Bcf
in 1995. As a result, U.S. stocks were left at 2,256 Bcf as of
December 8, or 16.5 percent below the 5-year (1995-1999) average
as calculated by EIA. The East Region had the lion's share of the
withdrawals at 110 Bcf, which exceeds EIA's 5-year average
December weekly rate by 44 Bcf and left stocks at 1,479 Bcf, or
10.3 percent below average. Both the East Region and the
Producing Region withdrew about 7 percent of their working gas in
storage to meet last week's requirements. As of December 8, the
Producing Region had 530 Bcf in storage, 23.9 percent below the 5-
year average. The West Region, already facing low stocks, used
only 7 Bcf from holdings despite reportedly higher week-to-week
demand from electricity generation. At 247 Bcf, the West Region
was 30.5 percent below the 5-year average.
Spot Prices: The past week was highlighted by unprecedented
prices in the large California market where contributing energy
problems include: long-delayed maintenance at several nuclear
facilities in California, reduced generating capacity, low availability
of hydroelectric power, unseasonably cool temperatures, below
average natural gas stock levels, and reduced transmission capacity
to southern California. This resulted in midpoint prices at
California's PG&E and SOCAL citgyates of $44.00 and $59.42
per MMBtu, respectively, on Monday with prices reaching a high of
$72.00 for a period of time on SOCAL. In response to this
situation, the U.S. Department of Energy imposed its authority to
require independent electricity generators to continue to operate and
the Federal Energy Regulatory Commission reimposed rate controls
on electricity generation. These governmental actions along with
moderating temperatures appear to have calmed the markets for the
time being. The prices at the California border on Friday ranged
from $10.85 in the north to $17.06 in the southern parts of the state.
Also, prices at major Canadian import points in Washington and
Idaho that were over $35.00 per MMBtu on the previous Friday
ended last week at $10.13. In the Midwest and the East, citygate
prices also rose sharply early last week but then moved down
through Thursday, falling to $7.73 per MMBtu in Chicago and
$8.25 in New York down from Monday's respective highs of
$12.63 and $12.23. These prices moved back up on Friday to $8.20
and $8.79 per MMBtu, respectively, on news of a revised NWS 6
to 10 day forecast calling for colder-than-normal temperatures over
most of the country between December 21 to 26.
Futures Prices: Settlement prices for the near-month (January)
NYMEX contract displayed some of their sharpest price variability
in the over-10 years that gas futures contracts have been traded. On
Monday, the near-month contract reached another all-time record at
$9.417 before moving down over $2.00 to $7.413 per MMBtu on
Thursday. It then gained back almost $1.00 on Friday to end the
week at $8.396 per MMBtu. Trading on the February and March
contracts also followed this pattern but at a slower pace as they
settled on Friday at $8.290 and $7.600 per MMBtu, respectively.
The recently released NWS long-range forecast and the below
average stock levels appear to be the key factors in these record-
high prices.
Summary: Prices on the spot and futures market at the Henry Hub
displayed wide levels of variability last week as prices reacted to
revised NWS forecasts and continuing concerns regarding natural
gas stocks. The price situation in California improved dramatically
at the end of last week following Federal intervention and the arrival
of warmer weather. |
