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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: EIA projects that natural gas wellhead prices will average $2.83 per MMBtu in 2002 compared with about $4.00 last year (Short-Term Energy Outlook, June 2002). Average wellhead prices have increased by nearly 50 percent from $2.09 per MMBtu in February to an estimated $3.11 per MMBtu in May. Spot prices at the Henry Hub have also increased, rising more than $1.00 per MMBtu since early February. It is atypical to see higher spot gas prices in the cooling season than during the heating season, particularly when working gas in underground storage is at high levels, as it has been for the past several months. As of the end of May, working gas levels were more than 20 percent above the previous 5-year average for that month. Moreover, gas-directed drilling, while down sharply from summer 2001 levels, is still quite strong from a historical perspective. The gas rig count as of May 31 was up 22 percent from the recent low of 591 for the week ending April 5. Given the ample storage stocks and overall resource development efforts of the past 10-18 months, EIA expects that wellhead prices will fall somewhat during the next few months if summer weather is normal or cooler than normal. If the summer temperatures are mild so the incremental demand for gas-fired electricity generation (to run air-conditioners) turns out to be moderate, the wellhead price could once more dip below $3.00 per MMBtu. Wellhead prices are expected to average $2.81 per MMBtu in the third quarter of 2002 and $3.23 in the fourth quarter. Natural gas production is projected to fall by more than 3 percent in 2002 compared with the 2001 level. Major energy companies reported reductions in natural gas output for first quarter 2002 (compared with the same period in 2001) of between 3 and 4 percent. (Some of this decline may have been due to asset sales.) Lower natural gas prices have reduced production and resource development incentives from their highs of last summer. U.S. natural gas production continued to rise through December 2001, then began to fall in January 2002, a lagged response to the lower demand and prices. Natural gas net imports have been dropping monthly on a year-over-year basis since October 2001, reflecting the slowing demand for natural gas. Net imports of natural gas are projected to recover by November 2002 as natural gas demand increases. Natural gas demand this summer is projected to be 4.7 percent higher than last summer's level mainly because of the fall in natural gas prices since a year ago and the slowly reviving economy. Natural gas demand for the entire year 2002 is projected to increase by 3.2 percent over the level in 2001.
Source:
Energy Information Administration, Short-Term Energy Outlook,
June 2002. File last modified: 06/13/2002 |
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