Consumers are expected to consume more natural gas at a higher price to heat their homes this winter, resulting in a 10% hike in household gas bills over last winter, according to the Energy Information Administration’s (EIA) Short-Term Outlook for October and Winter Fuels Outlook.

The government agency noted that the average 2007-2008 winter price per Mcf is likely to increase 78 cents over 2006-2007 winter levels to $13.14/Mcf, which equates to a 6.3% jump in the average price of gas.

On average, households heated primarily with natural gas are likely to spend an average of $78 more for fuel this winter, the EIA said in the combined outlooks, which were released Tuesday. The agency projects that the average household will use 67.8 Mcf of natural gas this winter and will pay a total of $891 compared with $813 in the 2006-2007 heating season. Gas consumers in the Northeast and Midwest will see the biggest winter bills — $1,212 and $1,045, respectively. Customers using all other types of heating fuels will pay more this winter as well: heating oil ($319 more), propane ($221 more) and electricity ($32 more).

The higher natural gas bills reflect the combined effects of a 6% increase in prices and 3% hike in consumption due to colder weather that is anticipated for this winter heating season, which begins Nov. 1. According to the National Oceanic Atmospheric Administration’s most recent projection, the upcoming winter in the Lower 48 states is forecast to be 4% colder compared with last winter, but 2% warmer than the 30-year average. The EIA estimates that 58% of U.S. households use natural gas to heat their homes.

Henry Hub spot prices averaged $6.26/Mcf in September, which marked the fourth consecutive decline in the monthly average spot price due to the lack of significant hurricane activity in the Gulf of Mexico and historically high inventories, the agency said. It projects that spot prices at the Henry Hub will rise to a winter peak of $8.65/Mcf in January 2008. Spot prices are likely to average $7.21/Mcf for the current year and $7.86/Mcf in 2008.

Working gas inventories by the start of the heating season are projected to reach 3,444 Bcf, slightly below the all-time high for natural gas storage inventories recorded at the end of November 1990, according to the EIA.

Heating degree days in the fourth quarter are expected to rise by 10% over the corresponding period in 2006, contributing to expectations of 9.5% and 6.9% growth in residential and commercial sector natural gas consumption, respectively, over last year, the EIA said. It estimates that total gas consumption will rise by 4.6% to 62.25 Bcf/d for the year from 59.50 Bcf/d in 2006 because of increases in the residential, commercial and electric power sectors, particularly in the first half of the year.

The continuation of near-normal weather is expected to slow year-over-year consumption growth by 0.4% to 62.51 Bcf/d in 2008, the agency noted. Residential consumption growth would likely rise by 1.5%, but only small changes are anticipated in the commercial and electric power sectors next year. Industrial gas demand is projected to drop by 0.9% this year but increase by 0.4% in 2008.

On the supply side, the EIA projects that U.S. marketed natural gas production will rise by 1.3% to 53.78 Bcf/d this year from 53.10 Bcf/d in 2006, and will be followed by a slight increase of 0.9% in 2008. In the Gulf of Mexico, where year-to-date tropical storm-induced production losses currently total 8.27 Bcf, marketed production is expected to decline by 2.6% to 7.59 Bcf/d from 7.79 Bcf/d in 2006, and then increase by 5.4% in 2008 as a result of developing deepwater supply infrastructure, the agency said. In the Lower 48 region, it said marketed production is anticipated to rise by 1.9% to 44.94 Bcf/d this year from 44.09 Bcf/d in 2006, offsetting production declines in the Gulf, and increase by 0.2% in 2008.

The EIA estimates that liquefied natural gas (LNG) imports will climb by a total of 260 Bcf, or by 44.5%, this year and by about 170 Bcf in 2008. It noted that LNG currently is being imported in the United States at a rate of 2.31 Bcf/d, up from 1.60 Bcf/d in 2006, and projects imports will average 2.76 Bcf/d in 2008. “High natural gas prices in the United States created a surge in shipments to the United States during the first half of 2007. [But] LNG imports have slowed in the last two months as natural gas demand in Japan for electricity generation has increased since the shutdown of the Kashiwazaki-Karlwa nuclear power plant in July.”

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