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 $4.20 per MMBtu through January 2003 and then increase to $4.61 in February and $4.23 in March (Short-Term Energy Outlook, released January 8, 2003). Wellhead prices for the overall heating season (November through March), assuming normal weather, are expected to average about $4.10 per MMBtu, or $1.74 more than last winter's levels, while prices to residential customers are expected to average $8.51 per MMBtu compared with $7.14 last winter. Natural gas prices were higher than expected in November and December 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 $5.00 per MMBtu in the second week of December and stayed near or above this threshold through the end of the month. Overall in 2002, wellhead prices are expected to average $2.90 per MMBtu compared with $4.00 in 2001. In 2003, average wellhead prices are projected to increase about $1.00 per MMBtu over the 2002 level to $3.90 per MMBtu, owing to expectations of higher demand levels than in 2002 and lower storage levels for most of the year compared with 2002 levels. Total natural gas demand in 2002 declined by an estimated 1.7 percent from the 2001 level, mainly because of overall weakness in the industrial sector, particularly in the first three quarters of the year. However, solid growth in natural gas demand of 4.7 percent seems likely in 2003, especially if industrial sector consumption expands significantly as expected. In 2004, natural gas demand is projected to rise by an additional 2.7 percent as industrial demand continues its recovery from its 2002 lows. Based on preliminary data through September 2002, domestic dry natural gas production appears to have been mostly flat in 2002 compared with an estimated growth rate of 2.4 percent in 2001. Lower demand and lower natural gas prices in 2002 reduced production and resource development incentives relative to 2001. As of January 3, 2003, working gas stocks were 2,331 Bcf, which is only 2 Bcf (0.1 percent) less than the 5-year average, despite the abnormally cold weather in November and December. Furthermore, natural gas-directed drilling while down sharply from 2001 levels, is still quite strong from a longer historical perspective. Also, the gas-directed rig rate rose in December. Baker-Hughes reported that the number of rigs drilling for natural gas averaged 714 in December compared with 683 in November. In 2003, production is expected to be 19.45 trillion cubic feet, which would be a solid increase from production levels in 2002. Also, net imports of natural gas are expected to increase in both 2003 and 2004, which should relieve some of the potential upward price pressure on the domestic market
Source: Energy Information Administration, Short-Term
Energy Outlook, January 2003. Need Help? |
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