Gas prices stay high on huge storage withdrawals

Dec. 4, 2000
Low inventories of gas in the West, coupled with huge withdrawals from storage and continued high demand for gas-fired power generation throughout the nation, led to increased futures contracts prices and cash prices remained strong at $6.60/MMBtu at Henry Hub. California continued to wrestle with the impact of the gas supply squeeze leaving the state with volatile and high prices.


Low inventories of gas in the West, coupled with huge storage withdrawals and continued high demand for gas fired power generation, led to increased futures contracts prices and strong cash prices. The January contract hit a record for a near-month contract to settle at a high of $6.673/MMbtu and cash prices ended the week at $6.60/MMBtu at Henry Hub. California continued to wrestle with the impact of the gas supply squeeze, leaving the state with volatile and high prices.

Energy Information Administration (EIA) released its weekly gas report for the last full week of November on Monday. Gas continues to be drawn down leaving inventories at lower levels than in years past in the West and in the producing regions, according to EIA. Gas storage in the Western region and the gas producing areas each remain 65% full, while the eastern region remains at 85%.

The net draw on storage in the US was 146 bcf for the week ending Nov. 24, according to the report. That was the largest amount ever withdrawn from storage for the last full week of November, according to the EIA. Natural gas stocks in the US stood at 2,512 bcf as estimated by EIA or 12% less than the 5-year (1995-1999) average. Withdrawal of 42 bcf in the producing regions left that area with stocks at 18.6% below the 5-year average.

EIA expects gas prices in California to continue to be high and volatile, attributable in part to the low stocks in the region. At one point, Pacific Gas and Electric Co. had to impose an operational flow order that limited the amount of gas customers could take out of the pipeline

Spot prices for Canadian and out-of-state supplies for California were $14.47 and $5.88 respectively. By the end of the week, those prices had edged up to $16.28 and $6.40. Spot cash prices established seasonal highs in many other locations in the US. Chicago hit $6.70/Mcf, Henry Hub prices $6.60/Mcf and New York at $7.52.

The Alliance pipeline opened last Friday with deliveries from Canada to the Midwest and to New England. But there was no impact on prices, according to the EIA. The pipeline is supposed to improve supply of gas to the US by 1.3 bcfd.

Starting Dec. 9, the National Weather Service is predicting below normal temperatures in the major gas consuming areas of the Midwest and normal temperatures elsewhere.