The Energy Information Administration (EIA) last week once again cut its projected outlook for Henry Hub natural gas prices in 2010.
According to the September Short-Term Energy Outlook, Henry Hub spot prices now are expected to average $4.54/MMBtu, which is 60 cents/MMBtu higher than in 2009 but 15 cents lower than the agency had forecast in July (see NGI, Aug. 16; July 12).
In 2011 EIA is forecasting that Henry Hub spot prices will average $4.76/MMBtu, which is down 22 cents from the month-ago Outlook.
"These projections reflect updated expectations for economic activity, with forecasted U.S. real gross domestic product (GDP) growth of 2.8% in 2010 and 2.3% in 2011, down from the previous Outlook's growth projections of 3.1 and 2.7% for 2010 and 2011," the Outlook noted. EIA also cut its GDP growth rate forecast for 2011 world oil consumption to 3.3% from the 3.6% level of a month ago.
Natural gas consumption for power generation is projected to grow "by nearly 1.3 Bcf/d to 20.2 Bcf/d in 2010," said EIA. "The use of natural gas for electric power generation surged this year because of the 23% increase in U.S. cooling degree-days, resulting in an over 300 Bcf (11%) increase in natural gas consumption in the power generation sector over the last four months compared with the same period last year.
"Projected natural gas consumption in the power generation sector falls by 0.4 Bcf/d (2%) next year because of the expected return to near-normal summer temperatures."
Gas use by the industrial sector also is growing "significantly" this year," said EIA, up by 6.4%, from 16.8 Bcf/d in 2009 to 17.9 Bcf/d in 2010. Forecasted industrial-sector consumption growth is expected to slow to 1.2% in 2011 as the projected increase in the gas-weighted industrial production index slows from 7% in 2010 to 2.1% in 2011.
Total marketed natural gas production is predicted to jump by 1.2 Bcf/d (2.1%) to 61.2 Bcf/d in 2010. However, projected production is seen declining "gradually" in 2011, falling by 1.2 Bcf/d (1.9%) "as relatively low prices depress drilling activity."
Only 7.9 Bcf of natural gas production was shut in because of hurricanes during June, July, and August, compared with EIA's original projection of 57.4 Bcf for those three months.
"Nevertheless, the next two months are typically the height of the hurricane season and additional outages are included in this forecast," noted EIA. Based on the latest hurricane forecast by the National Oceanic and Atmospheric Administration, "during the final three months of the hurricane season this forecast includes 66.3 Bcf in outages with almost two-thirds of that total occurring in September."
EIA also is forecasting that the West Texas Intermediate (WTI) spot price, which averaged $77 per barrel in August, will average $77 per barrel in the fourth quarter of 2010 and $82 per barrel in 2011, slightly below the forecasts in last month's Outlook," it stated.
Annual average residential electricity prices are seen increasing "only moderately" in the forecast period, averaging 11.6 cents/kWh in 2010, compared with 11.5 cents in 2009. In 2011 prices are forecast to hit 11.9 cents/kWh, which is virtually unchanged from EIA's previous Outlook.
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