Natural Gas Summary from the Short-Term
Energy Outlook |
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Natural Gas Summary from the Short-Term Energy
Outlook: EIA projects that natural gas wellhead prices will range between $2.71 and $2.75 per MMBtu through October and then increase to $2.92 in November as the heating season gets underway (Short-Term Energy Outlook, September 2002). Prices remained above $2.90 during the last half of August as unusually hot weather across the nation resulted in added cooling demand, placing upward pressure on prices. Now that the summer is nearly over, cooling demand should be tapering off, while at the same time, the heating season has not yet begun. Overall in 2002, wellhead prices are expected to average about $2.73 per MMBtu compared with $4.00 in 2001. Prices during the upcoming heating season (November through March), assuming normal weather, are expected to average $3.20 per MMBtu, which is about $0.84 higher than last winter’s price. Domestic dry natural gas production is projected to fall by about 1.7 percent in 2002 compared with the 2001 growth rate of 2.4 percent. Lower natural gas prices have reduced production and resource development incentives from their highs of last year. Still, current supplies, including natural gas in storage, appear to be at very comfortable levels. Working gas in storage has exceeded the highest levels recorded in the previous 5 years since the beginning of the year. By the end of August, working gas storage stocks were about 2,781 Bcf, which is 12.5 percent above the 5-year average and 205 Bcf higher than a year ago. Moreover, natural gas-directed drilling, while down from the record levels of mid 2001, is still quite strong by a longer historical perspective. The gas rig count as of August 30, 2002, was 741, which is 25 percent above the recent low of 591 for the week of April 5, 2002. In 2003, production is expected to rebound by 3.2 percent as demand rises and inventories fall back closer to normal Natural gas demand is expected to increase sharply in November and December and early 2003 because of the expected continuation of solid recovery in the U.S. industrial economy by the fourth quarter of this year and the return of colder weather. The expected increase in natural gas demand for the coming winter, assuming normal weather, is 12 percent above the year-ago level. Natural gas demand for the entire year 2002 is projected to increase by 3.3 percent over 2001 levels in large part because of increased demand for natural gas for power generation. In 2003, natural gas demand growth is expected to increase by 3.6 percent, as the economy continues to recover. Natural gas demand growth is expected across all sectors, with the exception of the electric utility sector. This is because of the still ongoing transfer of ownership of electric power plants from utilities to independent power producers (included in the industrial sector) that stems from deregulation.
Source: Energy
Information Administration, Short-Term Energy Outlook, September 2002. File last modified: 09/12/2002 |
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