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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

   

 

 

Natural Gas Summary from the Short-Term Energy Outlook:

 

In the May 2003 Short-Term Energy Outlook, EIA projected that natural gas wellhead prices will remain high relative to historical levels.In February and March 2003, natural gas wellhead prices were more than double last yearís levels.Despite considerable declines posted in April 2003, wellhead prices are expected to remain between 42 and 73 percent above last yearís level through each of the remaining months of the refill season.This will push the average wellhead price to roughly $5.00 per MMBtu in 2003, an increase of about 60 percent over 2002.This projection is based in part on the expectation of lower volumes of underground gas in storage for 2003 compared with 2002.Levels of natural gas in underground storage remain low one month into the injection season.At the end of April, working gas in storage was roughly 789 Bcf, which is about 52 percent below end-of-April 2002 levels and 41 percent below the previous 5-year average.The exceptionally large shortfall in natural gas storage relative to normal levels continues to place unusually strong upward pressure on near-term gas prices because companies need to obtain large amounts of natural gas to refill storage for the next heating season, which will compete with other uses.Moreover, if abnormally warm weather prevails this summer, the market demand may surge, particularly in the Western and South Central United States, where natural gas is heavily used for power generation.Such conditions could cause a mid-year spike in prices to above $6 per MMBtu.

 

With high natural gas prices, natural gas demand is expected to fall by nearly 1 percent in 2003.†† Negative growth this year is likely despite sharply higher weather-related demand during the first quarter of 2003.Demand for natural gas this summer is expected to fall by 9.2 percent from last summerís level.This is largely due to summer weather effects (in the power sector).Assuming normal weather, cooling degree-days for the refill season will be close to 10 percent below year-ago levels. Demand for natural gas to refill working gas storage in 2003 will be larger than average, which means that price volatility can be expected to continue in these tight market conditions.Natural gas demand in 2004 is expected to rise as industrial demand recovers from its 2002-2003 lows.

 

Dry gas production is expected to increase by 1.4 percent in 2003.High natural gas prices and sharply higher oil and natural gas field revenues are expected to drive a resurgence in natural gas directed drilling activity this year following a downturn in 2002. Domestic production growth should continue in 2004 but, given recent experience, the additional drilling might result in increases of less than 2 percent. The prospects for significant reductions in natural gas wellhead prices over the forecast period from the current high levels could hinge on the productivity of the expected upsurge in drilling in terms of expected output.


 

Short-Term Natural Gas Market Outlook, May 2003

 

 

History

Projections

 

Feb-03

Mar-03

Apr-03

May-03

Jun-03

Jul-03

PRICES ($/MMBtu)

 

 

 

 

 

 

Average Wellhead Price

5.31

6.51

4.59

4.18

4.67

4.74

Residential Price

8.18

8.74

9.86

10.25

10.79

11.21

Electric Utilities Price

5.60

6.89

6.89

5.57

6.02

5.89

 

 

 

 

 

 

 

SUPPLY (Trillion Cubic Feet)

 

 

 

 

 

 

Total Dry Gas Prod

1.48

1.66

1.59

1.64

1.59

1.63

Net Imports

0.30

0.32

0.33

0.33

0.32

0.33

††† Imports

0.34

0.36

0.36

0.37

0.36

0.38

††† Exports

0.03

0.04

0.03

0.04

0.04

0.05

Suppl. Gaseous Fuels

0.01

0.01

0.01

0.01

0.00

0.01

Total New Supply

1.790

1.980

1.923

1.979

1.911

1.969

 

 

 

 

 

 

 

Working Gas in Storage

 

 

 

 

 

 

††† Opening

1.521

0.838

0.696

0.789

1.129

1.484

††† Closing

0.838

0.696

0.789

1.129

1.484

1.907

Net Storage Withdrawal

0.683

0.142

-0.093

-0.340

-0.355

-0.423

 

 

 

 

 

 

 

Total Supply

2.473

2.122

1.830

1.639

1.555

1.547

 

 

 

 

 

 

 

Balancing Item

-0.058

0.134

0.040

0.034

-0.033

0.016

 

 

 

 

 

 

 

Total Primary Supply

2.415

2.256

1.870

1.673

1.523

1.562

 

 

 

 

 

 

 

DEMAND (Trillion Cubic Feet)

 

 

 

 

 

 

Lease & Plant Fuel

0.091

0.104

0.102

0.106

0.102

0.105

Pipeline Use

0.053

0.049

0.040

0.032

0.030

0.033

Delivered to Consumers

2.271

2.102

1.728

1.534

1.390

1.425

Residential

0.824

0.638

0.389

0.239

0.147

0.115

Commercial

0.433

0.363

0.256

0.182

0.141

0.136

Industrial

0.690

0.708

0.669

0.638

0.580

0.542

Electric Power

0.324

0.394

0.414

0.475

0.523

0.632

Total Demand

2.415

2.256

1.870

1.673

1.523

1.562

 

Note:Latest wellhead price from the Short-Term Energy Outlook is based on preliminary data.

Source: Energy Information Administration, Short-Term Energy Outlook, May 2003.

 

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