Natural Gas Summary from the Short-Term Energy Outlook

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:

EIA projects that natural gas prices will continue at high levels through the rest of 2004 (Short-Term Energy Outlook, June 2004). Wellhead prices are expected to average $5.74 per MMBtu in the summer months (June–August) and $6.00 per MMBtu in the fourth quarter, while composite spot prices will likely stay well above $6.00 through December. Spot prices averaged about $5.35 per MMBtu in the first quarter of the year but have been above $6.00 since the beginning of May, as strong demand for natural gas coupled with high petroleum prices has led to higher gas prices despite nearly normal storage inventory levels. Storage stocks at the end of May were less than 1 percent below the 5-year average and 23 percent higher than last year at this time. Overall in 2004, spot prices will likely average about $6.05 per MMBtu, which is 13 percent higher than the 2003 average. In 2005, prices are expected to decrease only slightly as production gains are expected to be relatively low.

Natural gas production is estimated to have increased by approximately 0.6 percent in 2003. Growth of about 0.9 percent in 2004 is expected as new natural gas well completions, which totaled an estimated 20,000 in 2003, remain high at more than 24,000 wells per year for the next 2 years. Because of apparently high decline rates from existing wells, these high drilling rates are not expected to yield more than modest net gains in U.S. production. Natural gas demand is expected to increase by about 1.4 percent in 2004, owing to increasing economic growth, the lack of fuel-switching options given the high cost of oil, and the continuing rise in electricity demand. Demand growth in 2005 is expected to be minimal (0.2 percent) as some of the current pressure on natural gas in the electric power sector eases and relative coal and fuel oil spot prices decline somewhat.

Short-Term Natural Gas Market Outlook, June 2004
	History			Projections
	Mar-04	Apr-04	May-04	Jun-04	Jul-04	Aug-04
PRICES ($/MMBtu)
Average Wellhead Price	4.84	5.06	5.21	5.48	5.76	5.92
Residential Price	9.07	9.88	10.71	11.79	12.43	12.83
Electric Utilities Price	5.14	5.51	5.69	5.98	6.17	6.28

SUPPLY (Trillion Cubic Feet)
Total Dry Gas Production	1.634	1.568	1.619	1.564	1.624	1.628
Net Imports	0.250	0.237	0.259	0.248	0.264	0.265
Imports	0.315	0.313	0.317	0.304	0.323	0.327
Exports	0.065	0.057	0.057	0.056	0.060	0.062
Suppl. Gaseous Fuels	0.005	0.004	0.005	0.005	0.006	0.006
Total New Supply	1.889	1.809	1.883	1.817	1.894	1.898

Working Gas in Storage
Opening	1.163	1.028	1.227	1.601	1.993	2.305
Closing	1.028	1.227	1.601	1.993	2.305	2.602
Net Storage Withdrawal	0.135	-0.199	-0.374	-0.392	-0.312	-0.297

Total Supply	2.024	1.610	1.509	1.425	1.582	1.601

Balancing Item	0.116	0.148	0.052	0.009	0.012	-0.005

Total Primary Supply	2.140	1.758	1.561	1.434	1.593	1.596

DEMAND (Trillion Cubic Feet)
Lease & Plant Fuel	0.096	0.092	0.095	0.093	0.096	0.096
Pipeline Use	0.063	0.051	0.047	0.045	0.047	0.047
Delivered to Consumers	1.981	1.615	1.419	1.297	1.450	1.452
Residential	0.608	0.400	0.236	0.155	0.126	0.117
Commercial	0.357	0.246	0.180	0.142	0.138	0.134
Industrial	0.661	0.609	0.550	0.506	0.553	0.564
Electric Power	0.355	0.359	0.454	0.494	0.634	0.638
Total Demand	2.140	1.758	1.561	1.434	1.593	1.596

Source: Energy Information Administration, Short-Term Energy Outlook, June 2004.

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Short-Term Natural Gas Market Outlook, June 2004