Gas prices soar to $20/ Mcf in California

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Online Story (Nov 27, 2000)

Gas prices soar to $20/ Mcf in California

Energy Information Administration said natural gas prices spiked into the teens in California and colder temperatures sent prices up $1.00/ Mcf to well over $6.00/ Mcf last week in most other locations. The December NYMEX futures contract gained around 15¢ to 17¢ each day ending at a near record settlement price high of $6.57. Huge withdrawals from storage told most of this story. The American Gas Association estimated that withdrawal of gas topped 94 bcf for the week ended Nov. 17. That was the largest withdrawal for this particular week in the 7 years covered by the American Gas Association. It’s double the average withdrawal, EIA said in a report today. The western region experienced a huge withdrawal 31 bcf of gas. AGA also noted that the huge withdrawal was very early in the heating season. The western region now has a deficit that has widened by nearly 27.3%. EIA estimated that total US stocks were 2,658Bcf or 8.1% below the 5-year average. Attention was focused again on California, as prices were approaching $10/ Mcf the previous week spiked as high as $19.50/ Mcf. Prices on the Southern California Edison Co. system peaked at $17.35/ Mcf and then fell to $15.86 by late Wednesday because of forecasts for warmer temperatures for that part of California. In the futures market, the December contract that reached the all time settlement high of $6.57/ Mcf led some to wonder what the price might have reached had there been a full trading day. The markets closed on Wednesday before the AGA released its withdrawal estimates. The working gas volume statistics released by the AGA showed the West only 67% full compared to the East of the country at 90%. Analysts responded to the news of record withdrawals of natural gas suggesting that with a return to normal winter, the US would consume 3,000 bcf of natural gas in storage this winter. “We are beginning the winter with only 2,750 bcf in storage, this normal winter scenario leaves us with an impossible negative balance of 255 bcf of storage,” said Marshall Adkins, analyst with Raymond James & Associates, in a statement. In the normal winter case, year to year winter demand should increase by a 9l.3 bcf a day or about 1,400 bcf for the 5 month heating season. But negative gas storage is obviously impossible unless the country draws on base gas. Adkins says the gas distribution system runs into difficulties when storage gets lower than 500 bcf. In order to balance the gas supply and demand, gas prices must continue rising to drive as much as 5 bcf out of the market, he said. He wasn’t willing to make a guess of what that price might be.

http://ogj.pennnet.com/Content/cd_anchor_printscreen/1,1242,OGJ_7_NEWS_DISPLAY_86070_1_7,00.html

-- Martin Thompson (mthom1927@aol.com), November 28, 2000


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