Government weekly gas commentary: (note the New York pricing was over $15)
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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, January 1, 2001, the
next issue of the Weekly Market Update will be published on
Tuesday, January 2nd.
Winter officially got underway this week with near-record stock
withdrawals, colder temperatures throughout the eastern half of
the country, flow restrictions on many interstate pipeline
systems, and reports of the season's first unplanned
interruptions. As four major gas-consuming metropolitan areas
were averaging 10 to 17 degrees below normal since Monday,
December 18 (see Temperature graph), private forecasters were
calling for cold weather to persist in the Northeast and Midwest
into next week. The National Weather Service (NWS)
broadened the possible range of the weather pattern by
predicting lower than normal temperatures from December 31
through January 4 for the entire Eastern Seaboard. In response,
spot prices at the Henry Hub increased $2.67 per MMBtu from
the previous Friday to finish the week at $10.50 per MMBtu,
and citygate prices for New York added over $7 per MMBtu to
end at $15.88. End-of-week prices in California were higher
than on Friday, December 15, but clearly have not returned to
levels seen before government intervention. On NYMEX, the
price for the futures contract for January delivery approached
the $10.00 per MMBtu threshold. Contrary to natural gas
markets, petroleum stock builds reported for the previous week
allowed the price of West Texas Intermediate crude oil to
plummet from almost $29.00 Friday, December 15 to $26.16 per
barrel ($4.51 per MMBtu) last Friday.
Storage: For the second consecutive week, 158 Bcf of working
gas was withdrawn from underground storage according to
American Gas Association (AGA) estimates. A continuation of
this rate through the end of the month will leave end-of-
December inventories below 2 Tcf for the first time since 1976.
Not until mid-January, when the rate of withdrawals dramatically
increases, do stocks typically plunge through the 2 Tcf level. As
a result of last week's 158 Bcf draw, which was almost 50
percent more than EIA's 5-year (1995-1999) average December
weekly rate, U.S. stocks were left at 2,098 Bcf on December 15,
or 19.1 percent below the 5-year average as calculated by EIA.
The East Region had a 100 Bcf withdrawal, the equivalent of
almost 7 percent of its stocks in underground storage, which left
stocks at 1,379 Bcf 12.9 percent below the 5-year average. The
Producing Region had 484 Bcf in storage, 27.6 percent below
the 5-year average, following a draw of 46 Bcf, which, like the
East Region, was the second highest amount for the week since
the inception of the AGA data 6 years ago. Continued high
demand reported for electricity may have been a contributing
factor to a 12 Bcf draw on stocks in the West Region. The
West Region was 31.4 percent below the 5-year average at 235
Bcf.
Spot Prices: During a week marked by low temperatures,
significant stock withdrawals, and flow restrictions, the spot
price at the Henry Hub jumped an astonishing $2.67 per MMBtu
to end the week at $10.50 per MMBtu, $8 higher than the same
date last year. Prices in most markets softened slightly on
Tuesday, and the anticipation of lower holiday-related demand
caused larger price drops at many price points on Friday.
However, these corrections were easily overshadowed by the
cumulative upward price movements of the other 3 days.
Friday-to-Friday increases were recorded at every location
tracked by Gas Daily, with most increases in the $1.00-$4.00
per MMBtu range. Citygate prices in Chicago and New York
increased 69 and 81 percent, respectively, this week, mainly in
reaction to colder temperatures, to end at $13.89 and $15.88 per
MMBtu. The PG&E spot price was up another $3.40 per
MMBtu for the week, a possible result of price competition for
Canadian imports that could otherwise go to satisfy demand in
the East. The growth in citygate prices in Michigan was held
below $2.25, where withdrawals from relatively abundant stocks
caused transportation capacity at storage interchanges to
dwindle. In Southern California, where temperatures warmed to
nearly-normal levels, Friday-to-Friday price increases were just
under $1 per MMBtu.
Futures Prices: While volatility in prices for the near-month
(January) NYMEX contract narrowed from last week, the
highest price recorded for the week came in just short of the $10
per MMBtu benchmark, reaching $9.860 during trading on
Friday, December 22. January settlement prices escalated from
the previous Friday's $8.396 per MMBtu to a record high of
$9.830 on Thursday, which was more than double the near-
month price on the first day of this heating season. The
settlement price dropped back to $9.579 in Friday's abbreviated
session when traders liquidated many of the January positions
that are set to close December 27. Natural gas stocks continue
to be a factor not only in near-month prices, but also for the
February contract which settled on Friday, December 22 at
$8.932, nearly twice the value recorded at the beginning of the
heating season. Since November, concern over the
replenishment of perhaps severely depleted stocks has already
added about a dollar to prices for summer-month contracts.
Summary: Prices on the spot and futures markets at the Henry
Hub escalated in response to cold weather in the Eastern half of
the country. Continued cold weather and stock withdrawals
could keep upward pressure on prices well into the new year. |
