Natural Gas Prices Dip Amid Mounting Supplies
Consumers can count on lower natural gas bills this winter heating season, as record-high supplies push prices down.
Natural gas futures in New York took their biggest one-day slide in almost a year Thursday after the latest industry supply data showed U.S. inventories have barely been dented.
For residential customers of Southern California Gas, the average homeowner’s bill will be below $60 a month from December through February, versus about $80 a month last winter, said spokeswoman Denise King.
She said those bill estimates are based on homes using 75 therms of gas--roughly the amount of gas a typical Southern California home uses in a month.
King said bills for the average renter in Southern California Gas’ coverage area, which includes most of Southern California other than Long Beach and San Diego, will fall to about $25 a month this winter, versus about $35 a year ago.
PG&E; Corp.’s main utility, Pacific Gas & Electric, said Thursday that the average natural gas bill for its customers will be 60% lower in January than a year ago. The company credited higher supplies and lower demand in the wake of warm weather across much of the U.S.
PG&E;’s average residential natural gas bill will be $48.38 next month, spokesman Ron Low told Bloomberg News. Last January, as gas prices were soaring amid tight supplies particularly in California, the average bill was $121.92.
A spokesman for San Diego Gas & Electric Co., Ed Van Herik, said his company also expected prices to decline but the size of the cut won’t be determined until early January. He noted that prices have been down about 30% this month versus the level of December 2000 and were down about 20% in November.
In January of this year, the average residential gas bill for SDG&E; customers was $95.60.
Although natural gas prices influence electricity prices, largely because gas is used to fire many power plants, analysts said the latest declines in gas prices will not translate into lower electricity bills for most of California’s consumers or business owners.
The California Public Utilities Commission raised electricity rates earlier this year but, analysts said, it is unlikely to cut rates now due to the continuing financial struggles of the state’s dominant investor-owned electric utilities, PG&E; and Southern California Edison.
On the other hand, the lower cost of generating electricity should help PG&E; and Edison, both which suffered enormous losses when power prices soared amid California’s energy crisis. Analysts said the lower costs for generating electricity also could relieve some of the strain on the state budget from purchasing power, because some of California’s long-term electricity contracts are tied to the cost of natural gas.
“Lower gas prices help everybody expect the gas producers,” said Lee Cordner, an energy consultant in San Rafael. “Last year at this time, you were looking at gas prices that were astounding, and the electricity prices reflected that. Now, the situation is almost back to normal.”
In New York on Thursday, near-term natural gas futures tumbled 35.6 cents, or 12%, to $2.56 per million British thermal units. The price still is above the recent low of $1.83 set in late September, but down dramatically from early this year, when the cost spiked as high as $9.80.
Prices slumped Thursday after the American Gas Assn. said total gas in storage eased to 2.98 trillion cubic feet last week from 3.06 trillion a week earlier. Despite the decline, the latest total still is 54% above supply levels a year ago, and only modestly below the peak of 3.14 trillion set in late November.
Gas inventories normally are built up in summer and fall.
Although below-normal temperatures next week in the U.S. Midwest and Northeast will boost heating demand for gas, there should still be ample supplies left in storage, traders said.
“Even if an ice age sets in tomorrow, you’re still going to end up with a lot of gas in storage at the end of March,” Kyle Cooper, an energy analyst at brokerage Salomon Smith Barney in Houston, told Bloomberg News.
High prices in 2000 and early this year encouraged more production. But as the economy has weakened, industrial demand for the fuel has been below expectations.
Also, much of the U.S. experienced the second-warmest November in more than a century, allowing gas inventories to rise.
Crude oil prices also have plunged this year, but major oil producers are expected today to announce a sharp cutback in production to shore up prices.
Saudi Arabia’s oil minister, Ali Ibrahim Naimi, said he was certain the Organization of the Petroleum Exporting Countries will trim its official output by 1.5 million barrels a day. Non-OPEC nations are expected to announce cuts of about 500,000 barrels a day.
Crude oil futures had surged Wednesday in anticipation of today’s announcements, but near-term oil futures slipped modestly Thursday, down 37 cents to $20.90 a barrel in New York.
An OPEC official, speaking on customary condition of anonymity, said that an OPEC production cut was a done deal and that the cartel’s 11 members would spend much of today’s meeting discussing ways of ensuring compliance with the new, lower target.
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Bloomberg News and Associated Press were used in compiling this report.
