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 remain relatively high through late spring, averaging $6.00 per MMBtu in March, $5.41 in April, and $4.91 in May (Short-Term Energy Outlook, March 2003). Spot prices at the Henry Hub were above the $6.00 mark virtually all of February and spiked to $18.85 per MMBtu on February 25 as frigid weather covered much of the country. Henry Hub prices have fallen since then, reaching below $6.00 per MMBtu on March 12. Wellhead prices for the overall heating season (November through March), assuming normal weather for March, are expected to average $4.55 per MMBtu, which is $2.19 more than last winter’s price. Overall in 2003, wellhead prices are projected to increase more than 60 percent above the 2002 level to $4.65 per MMBtu, which would be a record annual price in both nominal and real terms. This projection is based on the expectation of lower volumes of underground gas in storage compared with last year and continued increases in demand over 2002 levels. Cold temperatures since the first of the year have increased heating demand and led to a rapid drawdown of storage stocks, particularly in the East. As of March 7, 2003, working gas in storage was almost 48 percent below the previous 5-year average, and inventories in the East were nearly 56 percent below the 5-year average. In 2004, continued tightness of domestic natural gas supply and high demand levels are expected to keep the average wellhead price near the 2003 level. A solid 3.7 percent growth in
natural gas demand is projected in 2003, particularly if industrial sector
consumption expands significantly as expected. Sharply higher weather-related demand has occurred already in
January and February. Overall natural gas demand this winter is expected to
be almost 9 percent higher than last winter, as estimated gas consumption
weighted heating degree days during the fourth quarter of 2002 and first
quarter of 2003 are 13 percent higher than year-earlier levels, assuming
normal March temperatures. In 2004, natural gas demand is projected to
continue to rise as industrial demand continues its recovery from its 2002
lows. Natural gas production, which fell by about 2.8 percent in 2002, is projected to increase by 1.2 percent in 2003. High natural gas prices and growing oil and gas field revenues are expected to lead to a resurgence in gas-directed drilling activity, which could push gas drilling totals in 2004 to near or beyond the high levels seen in 2001. Domestic production growth should accelerate in 2004 but, given recent experience, production increases might be no more than 2 percent. With demand expected to outpace production growth, natural gas imports are expected to rise.
Source: Energy
Information Administration, Short-Term Energy Outlook, March 2003.
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