EIA Sees Demand Down 6% in 4Q
The Energy Information Administration is projecting gas demand
in the fourth quarter to be 5%-6% lower than it was in 4Q 1997,
which was a colder-than-normal quarter. It sees 8.9% fewer heating
degree-days this quarter than during the prior year's period. All
sectors are showing lower gas demand in this quarter, except for
electric utility gas demand, which may hold to levels seen in 4Q
1997. Overall natural gas demand growth this year is now projected
to be 2.9% below the 1997 level.
"On the assumption that weather conditions will be normal during
the remainder of the heating season and through 1999, we are still
projecting broad growth in gas demand next year. An expected growth
rate for total gas demand of 4.1% now characterizes our base case
outlook for 1999," EIA said in announcing its December Short Term
Energy Outlook. "Because most of this growth is predicated on
normal levels of heating demand over the next three to four months,
a continuation of above-normal temperatures in key heating regions
of the United States could drastically reduce or eliminate the kind
of significant recovery in gas demand shown in the base case for
Other experts see year-to-year demand losses as well. In August,
Energy Security Analysis, Inc. (ESAI) said that demand for 4Q98
would be 5.42 Tcf, an increase of over 200 Bcf from their 4Q97
numbers. The warm weather has changed their tune, however, and ESAI
is now forecasting 4Q98 demand to be 5.164 Tcf, representing a 1%
downturn from 4Q97's results. They are also predicting the average
cash price of gas for the last quarter in 1998 and the first
quarter of 1999 will not exceed $1.85.
WEFA (Wharton Econometric Forecasting Associates) reported in
April that 4Q 1998 demand would reach 5.75 Tcf, the highest of all
the groups providing numbers. Their latest numbers however, have
4Q98 at 5.63 Tcf, which is 30 Bcf less than their 4Q97 results.
WEFA is also saying that the annual cash price average for 1999
will be $1.97. The American Gas Association will be issuing its
projected demand figures Tuesday.
EIA said that the very warm weather in November and December is
expected to have a lasting impact on storage levels well into next
year. "Given this inventory overhang, we are lowering our price
projections from an annual average wellhead price of $2.10/Mcf in
the previous outlook, to about $1.90/Mcf. Prices above $2/Mcf are
not expected to appear until the fourth quarter of next year."
EIA expects average annual natural gas wellhead prices will
decline 15% this year from the 1997 annual average. Some of the
decline stems from a 24% drop during the unseasonably warm first
quarter of this year, but prices for the fourth quarter are
projected to be about 26% lower than the fourth quarter of 1997.
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