Spot gas prices at the Henry Hub were higher last month than in April due to high oil prices, low liquefied natural gas (LNG) imports, consumption growth and a year-over-year decline in working gas storage of 326 Bcf, the Energy Information Administration (EIA) said in its monthly Short-Term Energy Outlook, released last week.
The Henry Hub spot price averaged $11.65/Mcf in May, $1.16/Mcf more than the average spot price in April. On an annual basis, the Henry Hub spot price is expected to average a little more than $11/Mcf in 2008 and in 2009, an average increase of about $1.35/Mcf from last month's EIA forecast (see NGI, May 12). Conditions supporting spot prices are expected to continue, EIA said.
Gas consumption is expected to increase by 2.2% in 2008 and by 0.9% in 2009, according to the latest Outlook. Year-over-year increases in the residential, commercial and electric power sectors have been largely weather-driven. In 2009 residential and commercial consumption is expected to decline slightly while consumption for power generation is expected to increase by 2.5%.
Growth in the industrial sector, which increased by 4.8% in the first quarter of 2008 compared with the corresponding period last year, seems to be tied to export strength and some resurgence in gas-intensive industries, such as fertilizers, EIA said. In annual terms consumption in the industrial sector is expected to increase by 1.3% in 2008 and 0.4% in 2009.
U.S. marketed gas production is expected to increase by 6% in 2008 and by 1.5% in 2009, EIA said. This includes an estimated expected hurricane-induced outage of about 78 Bcf for the offshore region this year. High rig counts in the Lower 48 onshore region -- particularly in unconventional reserve basins -- are expected to lead to an increase in onshore production of 7.4% in 2008. Marketed gas production for 2009 from the Gulf of Mexico is projected to increase by 2.6% while the Lower 48 onshore region is expected to increase by 1.4%.
LNG imports remain substantially below last year's levels as supplies continue to flow to higher-priced markets of Asia-Pacific and Europe. Imports this year are expected to total about 530 Bcf, a decline of about 240 Bcf from 2007. In 2009 imports are expected to reach about 850 Bcf as new liquefaction capacity increases world supply, EIA said.
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