Natural gas prices in early 2002 reached low levels as a result of very warm weather in most of the United States. This lead to less use of gas for heating purposes and a subsequent increase in stocks which in turn drove prices lower. Sluggish economic growth also contributed to less use of natural gas as a fuel to generate electricity. Gas prices then started to recover in the first half of 2002 leading to an increase in production which in turn pushed prices lower. In August 2002 prices started to increase again. One contributing factor was a hurricane in October in the Gulf of Mexico which disrupted supplies from that major production region. At the same time, there were other factors supporting higher gas prices. One was the prospect that with winter approaching, more normal or colder temperatures would be seen. That would lead to increased used of natural gas for heating purposes. The second factor was the likelihood that the U.S. economy would begin to grow more rapidly as 2003 got underway. This would act to increase demand for electricity, which is in part generated by natural gas.

The U.S. Energy Information Administration reported that in July 2002, dry gas production in the U.S. was estimated at 1.60 trillion cubic feet, down 2 percent from a year earlier when output was 1.63 trillion cubic feet. In the January-July 2002 period, dry gas production was 11.35 trillion cubic feet, about the same as in the comparable period of 2001, but some 3 percent more than in 2000. For all of 2001, dry gas production was 19.45 trillion cubic feet. Gross withdrawals of natural gas in July 2002 were 2.03 trillion cubic feet. In the January-July 2003 period, gross withdrawals were 14.42 trillion cubic feet, about unchanged from the previous year. Net imports of natural gas in July 2002 were estimated to be 274 billion cubic feet, down 18 percent from a year earlier. In January-July 2002, gas imports were 2.01 trillion cubic feet, down 9 percent from the previous year. For all of 2001, net imports were 3.65 trillion cubic feet.

U.S. natural gas consumption in July 2002 was 1.52 trillion cubic feet, an increase of 2 percent from a year earlier. In the January-July 2002 period, gas consumption was 12.57 trillion cubic feet, down 5 percent from the previous year. In the first seven months of 2002, natural gas delivered to residential consumers was 3.16 trillion cubic feet, down 5 percent from the previous year. Gas delivered to commercial consumers was 1.97 trillion cubic feet, down 1 percent from the previous year while gas delivered to industrial consumers was 5.03 trillion cubic feet, down 5 percent.

Futures Markets

Natural gas futures and options are traded on the New York Mercantile Exchange (NYMEX). Natural gas futures are listed in London on the International Petroleum Exchange (IPE).

Excerpted from the CRB Commodity Yearbook. For more information on CRB products click here

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