Average household heating expenditures for the upcoming winter season are expected to be 15% more than last winter, increasing from an estimated $986 spent a year ago to a projected $1,137, the Energy Information Administration (EIA) said in its combined Short-Term Energy and Winter Fuels Outlook last Tuesday.
Households heated primarily with heating oil, which account for only 7% of U.S. households, can expect to see the biggest jump in winter heating costs, paying an average of $449 more (23% hike). Natural gas-heated households, which make up more than 50% of the households in the nation, will likely pay an average of $155 more this winter (18% higher), the EIA said.
Electric homes are expected to see the lowest cost hike this winter. The agency anticipates that the 35% of households that rely on electricity are likely to fork over an average of $89 (10%) more this winter, while propane-heated houses are projected to shell out an average of $188 (11%) more during the 2008-2009 heating season, which runs from Nov. 1 through the end of March.
The EIA's projections are in line with those of the American Gas Association, which last Monday forecast that gas consumers could wind up paying 10-30% more in home heating costs this winter.
The projected year-over-year percentage increases for households could change significantly if the weather is colder than forecast -- heating oil (35.5% higher than last winter), natural gas (29.3% hike), propane (24.6%) and electricity (13.9%), according to the EIA. Likewise, the percentage increases could be less if the weather is warmer than expected.
The EIA estimates that the average residential winter price for natural gas will be $14.82/Mcf, but it could rise to $15.22/Mcf in the event of colder weather. "The increase in end-use prices [this year over last] is the result of the particularly high spot prices that were recorded earlier this year as a portion of the inventories for the upcoming heating season were being built. Beyond winter, continued growth in onshore production is expected to bring prices down," the agency said. For the year, it expects residential gas prices to average $14.23/Mcf, up from $13/Mcf in 2007.
"This winter, total residential consumption of natural gas in the United States is expected to increase 3.5% year-over-year based on [a] projected 2.4% increase in heating degree days. In addition to weather, worsening economic conditions add significant uncertainty to the forecast, particularly for the industrial sector," the EIA said.
For the year, the agency anticipates total gas consumption will rise by 2.4% to 64.69 Bcf/d, to be followed by a 1.9% hike to 65.89 Bcf/d in 2009. The projections are slightly down from last month's demand forecasts of a 2.7% growth to 64.85 Bcf/d for this year and 2.2% to 66.25 Bcf/d for 2009 (see NGI, Sept. 15).
The Henry Hub spot price averaged $7.88/Mcf in September, 62 cents/Mcf below the average spot price in August. The EIA said the price decline was due to the twin Gulf of Mexico hurricanes, moderate temperatures, lower crude oil prices and the uncertainties about future economic growth. On an annual basis, the spot price is expected to average about $9.67/Mcf this year and $8.17/Mcf in 2009, up from $7.17/Mcf in 2007. For the winter months, it sees an average spot price of $8.96/Mcf for natural gas, which could jump to $10.55/Mcf or more if the weather is frigid.
Despite the current credit crunch and financial turmoil, the EIA anticipates that U.S. marketed gas production will continue at a strong pace, increasing by 6.7% to 58.91 Bcf/d this year and by 4.2% to 61.39 Bcf/d in 2009. "Domestic production continues to be led by the development of fields in the Lower 48, non-Gulf of Mexico region, which is expected to increase production by 9.7% [to 50.90/Mcf this year]," the agency said.
With much of the Gulf gas production still shut in weeks after Hurricane Ike, the EIA said that marketed gas production from the federal Gulf waters is projected to drop 9.1% 6.90 Bcf/d this year from 7.59 Bcf/d in 2007. Looking to 2009, however, it expects both Gulf and Lower 48 production to grow by 8.1% to 7.46 Bcf/d and 3.8% to 52.84 Bcf/d, respectively.
The production projections could be less optimistic in the months ahead, as more and more producers are curbing their drilling activities and cutting their capital expenditure budgets due to the uncertain economic climate (see related story).
The forecast for liquefied natural gas (LNG) imports continues to be bleak. "U.S. imports of...LNG remain below year-ago levels with third quarter imported cargoes less than half of what they were last year. Demand growth in Europe and Asia combined with limited global supply increases to date continue to weigh on the market," the EIA said.
"LNG imports to the United States are no longer expected to increase during the remainder of 2008, and import growth in 2009 remains vulnerable to additional delays in new capacity and unexpected maintenance on existing capacity. For the year, LNG imports are expect to total about 350 Bcf and about 450 Bcf in 2009 as the global LNG capacity is expected to be brought on-line."
The LNG import estimates are almost half of what the EIA had projected in April -- 680 Bcf for this year and about 950 Bcf for 2009 (see NGI, April 14).
As for inventories, working natural gas in storage at the end of September was estimated at 3,110 Bcf, 50 Bcf above the five-year average and 137 below the level for the corresponding period last year.
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