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Natural Gas Summary from the Short-Term Energy Outlook
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Natural Gas Summary from the Short-Term Energy Outlook

   

 

 

Natural Gas Summary from the Short-Term Energy Outlook:

EIA projects that natural gas wellhead prices will average $3.67 per MMBtu through December 2002 and then increase to more than $4.00 in January and February (Short-Term Energy Outlook, released December 9, 2002). Wellhead prices for the overall heating season (November through March), assuming normal weather, are expected to average about $3.90 per MMBtu, or $1.54 more than last winter's levels, while prices to residential customers are expected to average $8.15 per MMBtu compared with $7.14 last winter. Natural gas prices were higher than expected in November as below-normal temperatures throughout much of the nation increased heating demand, placing upward pressure on gas prices. Spot prices at the Henry Hub climbed above $4.00 per MMBtu in the last half of November after ranging between $3.80 and $3.90 per MMBtu during the first half of the month. Overall in 2002, wellhead prices are expected to average $2.96 per MMBtu compared with $4.00 in 2001. In 2003, average wellhead prices are projected to increase $0.63 per MMBtu to $3.59, owing to expectations of higher demand levels than in 2002 and lower storage levels for most of the year compared with 2002 levels.

 

Domestic dry natural gas production is projected to fall by about 1.6 percent in 2002, compared with the 2001 growth rate of 2.4 percent. Lower demand and lower natural gas prices have reduced production and resource development incentives from their highs of last year. Nevertheless, current supplies appear to be at adequate levels. As of December 6, 2002, working gas stocks were 2,794 Bcf, only 2.9 percent less than the 5-year average, despite strong electricity-related demand increases during the second half of the year and hurricane-related outages, as well as the abnormally cold start to the heating season thus far. Furthermore, natural gas-directed drilling while down sharply from 2001 levels, is still quite strong from a longer historical perspective. The number of gas-directed rigs climbed by 10 to 705 for the week ending December 6, 2002, according to Baker-Hughes Incorporated. This is the third highest gas rig count reported for the week in the 15 years that Baker Hughes has reported rigs separately by gas or oil drilling. In 2003, production is expected to rebound by about 2.7 percent as demand rises and inventories fall back closer to normal.

 

Total natural gas demand for the first half of 2002 fell by 750 Bcf, a decline of 6.5 percent from 2001 levels, although much of the decline was due to weather effects in the residential and commercial sectors. In contrast, natural gas demand in the combined residential and commercial sectors during the second half of 2002 is expected to be 14.4 percent higher than 2001 levels. Overall in 2002, however, natural gas demand is expected to decline by 0.9 percent from the 2001 level, owing to overall weakness in the industrial sector. Solid growth in natural gas demand of 4.0 percent seems likely in 2003, especially if industrial sector consumption expands significantly as expected. For this Outlook, natural gas demand reflects data revisions employed to be consistent with definitions and aggregates used in the 2001 edition of EIA's Annual Energy Review (see "Data Notes” Short-Term Energy Outlook, December 2002). Historical demand data were revised upward by about 1 Tcf per year to adjust for likely undercounting of deliveries to power generating facilities (other than electric utilities) in the data collection system used to report supply and demand in EIA's Natural Gas Monthly and Natural Gas Annual. The revisions did not qualitatively change the pattern of annual demand shifts reported in earlier Outlooks.

 

Short-Term Natural Gas Market Outlook, December 2002 

 

History

Projections

 

Sep-02

Oct-02

Nov-02

Dec-02

Jan-03

Feb-03

PRICES ($/MMBtu)

 

 

 

 

 

 

  Average Wellhead Price

2.90

3.26

3.64

3.67

4.07

4.19

  Residential Price

9.54

8.23

7.90

7.97

8.14

8.31

  Electric Utilities Price

3.33

3.57

4.19

4.41

4.81

5.01

 

 

 

 

 

 

 

SUPPLY (Trillion Cubic Feet)

 

 

 

 

 

 

  Total Dry Gas Production

1.49

1.54

1.52

1.58

1.69

1.52

  Net Imports

0.28

0.29

0.28

0.31

0.32

0.28

    Imports

0.33

0.34

0.32

0.35

0.36

0.32

    Exports

0.05

0.04

0.04

0.04

0.04

0.04

  Suppl. Gaseous Fuels

0.01

0.01

0.01

0.01

0.01

0.01

  Total New Supply

1.772

1.835

1.806

1.898

2.018

1.806

 

 

 

 

 

 

 

  Working Gas in Storage

 

 

 

 

 

 

    Opening

2.773

3.057

3.149

2.945

2.457

1.809

    Closing

3.057

3.149

2.945

2.457

1.809

1.416

  Net Storage Withdrawal

-0.283

-0.092

0.204

0.488

0.648

0.393

 

 

 

 

 

 

 

  Total Supply

1.489

1.742

2.010

2.386

2.666

2.199

 

 

 

 

 

 

 

  Balancing Item

0.082

-0.078

-0.062

0.015

0.005

0.175

 

 

 

 

 

 

 

  Total Primary Supply

1.571

1.664

1.948

2.401

2.672

2.374

 

 

 

 

 

 

 

DEMAND (Trillion Cubic Feet)

 

 

 

 

 

 

  Lease & Plant Fuel

0.090

0.093

0.092

0.097

0.100

0.090

  Pipeline Use

0.040

0.044

0.053

0.067

0.075

0.066

  Delivered to Consumers

1.442

1.527

1.803

2.238

2.496

2.217

    Residential

0.141

0.254

0.476

0.740

0.938

0.808

    Commercial

0.149

0.196

0.283

0.388

0.469

0.423

    Industrial

0.904

0.890

0.898

0.968

0.965

0.882

    Elec Utility

0.249

0.186

0.146

0.141

0.124

0.105

  Total Demand

1.571

1.664

1.948

2.401

2.672

2.374

 

Source:  Energy Information Administration, Short-Term Energy Outlook, December 2002.

 

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