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 prices will remain relatively high this summer and continue at elevated levels through the rest of 2003 (Short-Term Energy Outlook, June 2003). Natural gas wellhead prices are expected to average $5.40 per MMBtu in June and remain above $5.13 through December 2003. Spot prices at the Henry Hub have stayed well above $5.00 per MMBtu on a monthly basis since the beginning of the year and have been above $6.00 for the first 10 days of June. The low level of underground storage is the principal reason for these unusually high prices. As of June 6, 2003, working gas stocks were 1,324 Bcf, which is about 35 percent below year-earlier levels and 25 percent below the 5-year average. Natural gas prices are likely to stay high as long as above-normal storage injection demand competes with industrial and power sector demand for gas. Overall in 2003, wellhead prices are projected to increase about $2.33 per MMBtu (the largest U.S. annual wellhead price increase on record) over the 2002 level to a record annual high of about $5.20 per MMBtu. For 2004, prices are projected to ease only moderately, as supplies are expected to remain tight. Natural gas production is expected to increase by 2.2 percent in 2003. High natural gas prices and sharply higher oil and natural gas field revenues are driving the resurgence in gas-directed drilling activity following the downturn in 2002. Domestic production growth should continue in 2004 but, given recent experience, the extra effort might result in increases of less than 2 percent. The prospects for significant reductions in natural gas wellhead prices from the current high levels could hinge on the success of the new drilling efforts. Natural gas demand is expected to remain flat in 2003 and 2004 compared with the 2002 level. Little or no growth this year is likely despite sharply higher weather-related demand during the first quarter of 2003, as weakness in overall industrial output and sharply higher prices have resulted in stagnant or falling demand in the industrial and electric power sectors. Demand for natural gas this summer is expected to fall by close to 1 percent from last summer’s level, largely because of weather effects in the power sector. Assuming normal weather, cooling degree-days for the months of April through September will be about 8 percent less than year-ago levels. Continued tight market conditions increase the likelihood of price volatility.
Source: Energy
Information Administration, Short-Term Energy Outlook, June 2003. Need Help? |
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