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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 about $3.49 per MMBtu through December 2002 and then increase to $3.76 in January 2003, the peak demand month of the heating season (Short-Term Energy Outlook, released November 7, 2002). Natural gas prices were higher than expected in October as storms in the Gulf of Mexico in late September temporarily shut in some gas production, causing spot prices at the Henry Hub and elsewhere to rise above $4.00 per million Btu for most of October. In addition, early winter-like temperatures, particularly in the Midwest and Northeast, increased demand for natural gas, placing upward pressure on gas prices. Overall in 2002, wellhead prices are expected to average about $2.84 per MMBtu compared with $4.00 in 2001. Prices during the heating season (November through March), assuming normal weather, are expected to average $3.56 per MMBtu, which is about $1.20 higher than last winter’s price. Prices to residential customers during the heating season are expected to average $7.81 per MMBtu compared with $7.14 last winter. In 2003, wellhead prices are projected to average $3.28 per MMBtu, or about $0.44 per MMBtu more than in 2002, owing to expectations of increasing economic growth, little or no change in the annual average crude oil price for 2003, and lower storage levels for most of 2003 compared with 2002 levels. Domestic dry natural gas
production is projected to fall by about 1.3 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.
However, current supplies appear to be at very adequate levels. Working gas
in storage has remained well above the previous 5-year average since the
beginning of the year. As of November 1, 2002, working gas stocks were 3,145
Bcf, which exceeds the 5-year average by almost 5 percent despite net
withdrawals during the last week of October 2002. Furthermore, natural gas-directed
drilling, while down sharply from 2001 levels, is still quite strong by a
longer historical perspective. The weekly gas rig count in October averaged
709, down from the September average of 736. But this is only slightly below
the 2000 average of 720, which itself exceeds the level of average rigs
running in any year in the 1990s by at least 28 percent. In 2003, production
is expected to rebound by 2.6 percent as demand rises and inventories fall
back closer to normal. Natural gas demand is expected to increase through the rest of 2002 and into 2003 because of an expected upswing in the U.S. industrial economy and the return of colder weather. Overall in 2002, natural gas demand growth is projected to be 1.1 percent, as increased demand in the electric power sector and weather-related demand in the residential and commercial sectors offset weakness in industrial demand and declines in space-heating demand in the first part of 2002. Natural gas demand in the combined residential and commercial sectors for the last 6 months of 2002 is expected to be 13.2 percent higher than 2001 levels. In 2003, natural gas demand growth is expected to increase by 6.8 percent as the economy continues to recover.
Source: Energy
Information Administration, Short-Term Energy Outlook, November 2002. Need Help? |
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Energy Information Administration, EI 30 |
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