EIA Natural Gas Market Summary - 2/20/2004


Spot and futures prices moved in different directions over the past week, with spot prices at most market locations falling from a nickel to around 30 cents per MMBtu, while futures prices increased by a dime or less. At the Henry Hub, the spot price eased down 2 cents on the week, to $5.33 per MMBtu. On the NYMEX, the futures contract for March delivery increased $0.096 per MMBtu for the week, ending trading on February 18 at $5.356. EIA reported that natural gas inventories declined to 1,431 Bcf as of Friday, February 13, which is 6.2 percent lower than the previous 5-year (1999-2003) average. The spot price for West Texas Intermediate crude oil rose each day of the holiday-shortened week, and ended trading yesterday with an increase for the week of $1.49 per barrel ($0.24 per MMBtu), or a little over 4 percent, to $35.42 ($6.11 per MMBtu).

Spot prices moved lower week-on-week for the third consecutive week, despite large increases on Friday, February 13 in response to weather forecasts calling for significant cold fronts in the Midwest and Northeast over the long holiday weekend, and with little warming until well into the current week. The largest price increases on Friday were seen at Northeast market locations: Transco Zone 6 for New York delivery rose $1.75 per MMBtu to $7.73, while Tennessee Zone 6 topped all other points with an increase of $2.09 to $8.03 per MMBtu. While temperatures did fall as predicted, they were not nearly as cold, nor as widespread or persistent as forecasted. With weather-related demand falling below expectations, combined with the significant drop in industrial demand over the long holiday weekend, prices encountered downward pressure when markets reopened on Tuesday, February 17, resulting in lower prices for the week at nearly every market location. Prices at all Northeast trading points fell back below $6 per MMBtu yesterday to levels not seen (except for last Thursday, February 12) since late December. This week, regional average prices in West Texas, the Midcontinent and California fell below $5 for the first time this year, with week-ending averages of $4.70, $4.84 and $4.98 per MMBtu, respectively.

On the NYMEX, the settlement price for the near-month contract (March delivery) halted a 3-week string of week-on-week price declines, moving up just under a dime to settle on Wednesday, February 18 at $5.356 per MMBtu. Futures prices accompanied spot prices in their sharp drop on Tuesday, as National Weather Service 6-to-10 day and 8-to-14 day temperature outlooks issued on Monday, February 16 predicted above-normal temperatures for nearly the entire nation except the southwestern corner through the beginning of March. However, these outlooks had changed significantly by Wednesday, showing large pockets of projected below-normal temperatures along much of the East Coast as well as throughout California across into western Texas beginning in the last week of February. Futures prices got a small boost yesterday of about 3 to 5 cents per MMBtu for contracts for delivery through the next heating season. Combined with last Thursday’s and Friday’s increases in the March contract’s settlement price, Tuesday’s decline was not enough to offset increases, leaving the near-month contract with a $0.096 per MMBtu gain for the week. The April contract’s gain was slightly higher, at $0.102 to $5.309 per MMBtu. Week-on-week gains in contracts for delivery in out-months through February 2005 ranged from 1.6 to 7.2 cents per MMBtu.

Working gas inventories stood at 1,431 Bcf as of Friday, February 13, according to the EIA’s Weekly Natural Gas Storage Report. This is 95 Bcf, or 6.2 percent, lower than the previous 5-year (1999-2003) average of 1,526 Bcf for the week and 263 Bcf, or 22.5 percent higher, than stock levels at this time last year. The implied net withdrawal of 172 Bcf is the third largest among the 11 observations for this week in EIA’s weekly storage database. Colder-than-normal temperatures that dominated much of the nation during the week covered by this report figured heavily in this drawdown of inventories. According to the National Weather Service, temperatures as measured by gas-customer weighted heating degree days (HDD) were colder than normal in seven of the nine Lower 48 Census Divisions and for the United States as a whole. HDDs for the entire United States were 6.8 percent greater than normal.

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