Sam Fletcher
Senior Writer
HOUSTON, Jan. 16 -- Even as some Northeast utilities reported record demand levels because of colder weather, natural gas futures prices plunged Thursday on the New York Mercantile Exchange, in a knee-jerk market reaction to a slightly lower-than-expected withdrawal from US underground storage during the preceding week.
Prices were expected to rebound, however, as cold weather continued into the weekend in the key energy-consuming Northeast US. NYMEX was scheduled to close early on Friday and remain closed Monday in observation of the US holiday for civil rights leader, Martin Luther King.
Natural gas market
Early Thursday, the US Energy Information Administration reported 153 bcf of natural gas was withdrawn from US underground storage during the week ended Jan. 9. That was up from 52 bcf the previous week and 136 bcf during the same period in 2003. However, it was less than the 200 bcf pull that some Wall Street analysts expected (OGJ Online, Jan. 15, 2004).
The February natural gas contract fell by 54.2¢ to $5.85/Mcf Thursday on NYMEX in reaction to that report. "The market opened up but quickly tumbled to $6[/Mcf] after the EIA released last week's storage data and traded below there for most of the afternoon. It was cold in New York, but the weather in the Midcontinent and Texas was moderate," said analysts Friday at Enerfax Daily.
US gas storage now stands at 2.4 tcf, representing surpluses of 219 bcf vs. year-ago levels and 184 bcf above the 5-year average. "Weekly declines of 118 bcf are needed in the remaining 12 weeks of the withdrawal season for inventories to drop to about 1 tcf by April. If withdrawals match the 5-year average, storage will finish the heating season at about 1.3 tcf," the analysts noted.
Other energy prices
In a rare move, falling natural gas futures prices pulled down other energy commodities Thursday.
The February contract for benchmark US light, sweet crudes fell by $1.06 to $33.44/bbl on NYMEX, while the March contract plunged by $1.26 to $32.53/bbl, despite reports earlier this week that US oil inventories are now at the lowest level since the fall of 1975 and vulnerable to disruptions or a surge in demand.
On the US spot market, West Texas Intermediate at Cushing, Okla., lost 88¢ to $33.65/bbl Thursday.
The February contract for heating oil, which competes with natural gas in many US markets, fell by 3.75¢ to 92.99¢ /gal Thursday on NYMEX. Gasoline for the same month plummeted by 5.8¢ to 93.29¢ /gal.
In London, the February contract for North Sea Brent oil lost 53¢ to $31.56/bbl Thursday on the International Petroleum Exchange. Gas oil for February delivery dropped by 75¢ to $271.75/tonne. The February natural gas contract declined by 13.7¢ to the equivalent of $4.83/Mcf on IPE.
The average price for the Organization of Petroleum Exporting Countries' basket of seven benchmark crudes retreated by 16¢ to $30.37/bbl Thursday. That basket price has exceeded OPEC's target of $22-28/bbl for 29 consecutive trading days.
However, Algerian Energy and Mines Minister Chakib Khelil recently reiterated previous claims that OPEC will like maintain its production quota at 24.5 million b/d through its next meeting scheduled Feb. 10 in Algiers.
Dow Jones News Service quoted Khelil as saying, "It's clear that we are not going to reduce OPEC's contribution. Two options are available: keeping the ceiling at its current level or increasing it. One cannot venture to raise production when oil demand is expected to fall by 2.5 million barrels a day in the second quarter."
Contact Sam Fletcher at [email protected]
