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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 prices will remain relatively high through the rest
of 2003, with monthly wellhead prices ranging between $4.31 and $4.96 per
MMBtu (Short-Term
Energy Outlook, July 2003). The spot price at the Henry Hub has been
above $5.00 per MMBtu on a monthly basis since the beginning of the year. The price topped $6.00 in late May and
early June, as concerns escalated about the ability of the industry to
rebuild underground storage supplies.
However, natural gas storage injections were about 40 percent above
normal in June, posting a record increase of 487 Bcf for the month according
to STEO estimates. As of July 4, working gas stocks were 1,773 Bcf or 15
percent less than the 5-year average. A month earlier, working gas stocks
were about 26 percent below the 5-year average. Despite the improvement in
the storage situation, above average prices and strong gas-directed drilling
efforts will be needed to attain sufficient inventory levels by the beginning
of the heating season. Overall in 2003,
wellhead prices are projected to show an increase of about $2.00 per MMBtu
(the largest U.S. annual wellhead price increase on record) over the 2002
price, pushing the average for the year to about $4.85 per MMBtu. In 2004, prices are projected to drop by
13 percent as the overall supply situation improves slightly, assuming normal
weather. Natural
gas production is expected to increase by 3 percent in 2003 and hold at
improved levels in 2004. High natural gas prices and sharply higher oil and
natural gas field revenues are driving the resurgence in gas-directed
drilling activity this year following the downturn in 2002. The number of rigs drilling for natural
gas surpassed 900 in June and totaled 925 in the first week of July. On the imports side, natural gas imports
from Canada were down slightly on a year-to-year basis for the first quarter
of 2003, but imports of liquefied natural gas (LNG) totaled 75 Bcf in the
first 3 months of 2003 compared with 26 Bcf for the same period in 2002. While expanded LNG imports could
conservatively add about 140 Bcf of additional supply in 2003, total LNG
volumes are still likely to contribute less than 10 percent to total natural
gas imports into the United States. Natural gas demand is expected to remain flat in 2003
compared with the 2002 level, despite the high weather-related demand during
the first quarter of 2003. Demand for
natural gas this summer is expected to fall by more than 3 percent from last
summer’s level, because of the effect of higher prices on the industrial and
electricity-generating sectors. Also,
assuming normal weather, cooling degree-days for the season (Q2 2003 and Q3
2003) will be about 12 percent less than last summer’s levels. In 2004,
demand is expected to increase by about 1 percent from the 2003 level, mainly
because of somewhat weaker prices and higher demand in the electric power
sector.
Source: Energy
Information Administration, Short-Term Energy Outlook, July 2003. Need Help? |
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Energy Information Administration, EI 30 |
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