Natural Gas

Natural gas spot prices generally increased through March and most of April, hitting a 20-month high in recent weeks. An unusually cold March triggered price increases after three months of stagnant prices, as space-heating demand increased through much of the country and led to large storage withdrawals. Prices continued to rise in April as lingering cold in the Midwest kept market tight. The Henry Hub spot price averaged $4.17 per MMBtu in April, the highest monthly average price since July 2011. EIA expects Henry Hub spot prices will fall through September as natural gas markets loosen with lower summer demand. Going into the summer, EIA expects production to be slightly higher than last year's levels, while summer electric power demand is projected to be lower than last year's record-high levels.

Working natural gas stocks at the end of March 2013 were an estimated 1,683 Bcf, 32 percent lower than the 2,477 Bcf in working storage at the same time last year but roughly in line with earlier years. The very warm winter of 2011-12 contributed to the very high inventory at the start of last year's summer injection season (between the end of March and the end of October). Consequently, the forecast 2,113-Bcf build in working gas inventories during this summer's injection season is significantly higher than the 1,453 Bcf added last year and in line with longer historical experience. Higher natural gas prices this year contribute to lower natural gas consumption for electricity generation and the higher storage build.

U.S. Natural Gas Consumption

EIA expects that natural gas consumption, which averaged 69.7 Bcf/d in 2012, will average 70.2 Bcf/d and 69.6 Bcf/d in 2013 and 2014, respectively. Colder winter temperatures forecast for 2013 and 2014 (compared with the record-warm temperatures in 2012) are expected to increase the amount of natural gas used for residential and commercial space heating. The projected year-over-year increases in natural gas prices contribute to declines in natural gas used for electric power generation from 25.0 Bcf/d in 2012 to 22.8 Bcf/d in 2013 and 22.2 Bcf/d in 2014.

U.S. Natural Gas Production and Imports

Natural gas marketed production is projected to increase from 69.2 Bcf/d in 2012 to 69.9 Bcf/d in 2013, and 70.1 Bcf/d in 2014. Onshore production increases over the forecast period, while federal Gulf of Mexico production declines. Natural gas pipeline gross imports, which have declined over the past five years, are projected to remain near their 2012 level over the forecast period. Liquefied natural gas (LNG) imports are expected to remain at minimal levels of less than 0.5 Bcf/d in both 2013 and 2014.

U.S. Natural Gas Inventories

As of April 26, 2013, working gas stocks totaled 1,777 Bcf, which is 795 Bcf less than at the same time in 2012, 118 Bcf below the five-year (2008-12) average, and 51 Bcf above the four-year (2008-11) average excluding last year's very unusual experience according to EIA's Weekly Natural Gas Storage Report. EIA projects working gas stocks at the end of this summer's stock-build season (end of October) will reach 3,796 Bcf, about 134 Bcf below the level at the same time last year.

U.S. Natural Gas Prices

Natural gas spot prices averaged $4.17 per MMBtu at the Henry Hub in April 2013, up 36 cents from the $3.81-per-MMBtu average seen the previous month. EIA expects the Henry Hub price will increase from an average of $2.75 per million Btu in 2012 to $3.80 per MMBtu in 2013 and $4.00 per MMBtu in 2014.

Natural gas futures prices for August 2013 delivery (for the five-day period ending May 2, 2013) averaged $4.34 per MMBtu. Current options and futures prices imply that market participants place the lower and upper bounds for the 95-percent confidence interval for August 2013 contracts at $3.22 per MMBtu and $5.84 per MMBtu, respectively. At this time a year ago, the natural gas futures contract for August 2012 averaged $2.46 per MMBtu and the corresponding lower and upper limits of the 95-percent confidence interval were $1.52 per MMBtu and $3.96 per MMBtu.