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EIA Natural Gas Market Summary - 2/12/2004


Although seasonally cold weather continued to dominate the country this week, the absence of January’s extreme temperatures resulted in prices easing 20 to 75 cents per MMBtu since Wednesday, February 4. On the week (Wednesday, February 4-Wednesday, February 11), the Henry Hub spot price dropped 39 cents per MMBtu to $5.35. The NYMEX futures contract for March delivery also fell 39 cents on the week to close at $5.26 February 11. Natural gas in storage as of Friday, February 6, decreased to 1,603 Bcf, which is 2.3 percent below the 5-year average inventory for the report week. The spot price for West Texas Intermediate (WTI) crude oil rose $0.87 per barrel on the week to yesterday’s closing price of $33.93 per barrel, or $5.85 per MMBtu.

Chilly but seasonal weather reigned in most regions of the country this past week, leaving prices lower than last week at most Lower 48 market locations. For the week, production area trading locations in Texas and Louisiana generally dropped nearly 40 cents per MMBtu, or about 7 percent, while declines in the Northeast were higher at 60 cents or more. The Henry Hub spot price fell to $5.35 per MMBtu, 39 cents lower than last week and the lowest spot price at that trading location since December 1, 2003. Since January 6, 2004, when the Henry Hub spot reached this winter’s high to date of $7.04 per MMBtu, the spot price has declined 32 percent. In the Northeast, a break from January’s temperatures led to prices falling to just over $6 per MMBtu. The price at New York citygates dropped 73 cents per MMBtu on the week to $6.09. After reaching as high as $44 per MMBtu earlier this year, New York citygate prices have ranged between $6 and $7 per MMBtu in the most recent eight trading sessions. Prices in the Midcontinent production region fell 45 cents per MMBtu or more and at times dropped below the $5-mark as space heating demand diminished and higher than average withdrawals from storage may have allowed buyers to lower their reliance on spot market purchases. Although prices in the West continue to trade at a significant discount of 30 cents or more to the Henry Hub, declines on the week were generally less than in the East. The spot price at the El Paso Bondad trading point in Colorado fell 28 cents per MMBtu on the week to $4.85.

At the NYMEX, the price of the futures contract for March delivery at the Henry Hub decreased about 39 cents per MMBtu since Wednesday, February 4, to a close of $5.26 per MMBtu on Wednesday, February 11. As was the case with spot prices, the near-month contract price traded with little relative variability through the week, as storage levels appeared to counteract upward price pressure from continued seasonal temperatures across the country. The biggest daily price change came last Thursday, February 5, when the near-month contract fell 25 cents per MMBtu on a day when EIA reported an implied net withdrawal of 236 Bcf, one of the highest in EIA’s 9-year weekly storage database. At $5.26 per MMBtu, the near-month contract price is the lowest since before Thanksgiving. The March contract price is also at its lowest level since December 1, 2003. In trading this week, the April contract declined 13 cents, or 2.5 percent, to $5.207 per MMBtu. Further out, the prices from next month through October are all within a narrow range of just 6 cents. The 12-month strip, or the average price for contracts over the next year, closed yesterday at $5.341, a decline of 6 cents on the week.

Working gas in underground storage decreased to 1,603 Bcf as of Friday, February 6, according to EIA’s Weekly Natural Gas Storage Report. Inventories now stand 2.3 percent, or 38 Bcf, below the 5-year average of 1,641 Bcf. This is the first time since mid-December 2003 that storage inventories have fallen below the 5-year average. Despite the relatively cold January and February weather to date, inventories are still 232 Bcf, or 17 percent, higher than last year’s level of 1,371 Bcf at this time. The implied net withdrawal for the week was 224 Bcf, which is the second largest withdrawal so far this heating season. The withdrawal was considerably higher than both the 5-year average withdrawal (127 Bcf) and last year’s withdrawal (150 Bcf) during the comparable report week. During the week ending February 7, the weather for the country as a whole was approximately 5.6 percent colder than normal, as measured by heating degree days (HDDs) published by the National Weather Service, and 12 percent colder than last year. In the East North Central region, which includes Chicago and other Midwest population centers, temperatures were 2.4 percent colder than normal and 11 percent colder than last year. The Middle Atlantic experienced temperatures that were about 1 percent warmer than normal, but 8 percent colder than last year.

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