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EIA Again Increases 2013 Henry Hub Price Forecast

With natural gas working inventories remaining near record highs through the end of November, the Energy Information Administration (EIA) expects the Henry Hub spot price to average $2.78/MMBtu this year, down from $4.00/MMBtu in 2011, before rebounding to an average of $3.68/MMBtu in 2013.

The $3.68/MMBtu forecast for 2013 is a 5.4% increase from the $3.49/MMBtu forecast EIA issued last month (see NGI, Nov. 12).

EIA said natural gas futures prices for March 2013 delivery (in the five-day period ending Dec. 6) averaged $3.62/MMBtu. The lower and upper bounds for the 95% confidence interval for March 2013 contracts are $2.62/MMBtu and $5.00/MMBtu, respectively, compared to $2.62/MMBtu and $5.05/MMBtu at this time last year.

Inventories reached a weekly record high of 3,923 Bcf in early November and ended the month at 3,804 Bcf (the most recent EIA Weekly Gas Storage Report showed a injection of 2 Bcf).

"While inventories ended the injection season at a record high, it was due mainly to a high level of gas going into the injection season, rather than strong injection levels," said the EIA in its Short-Term Energy Outlook released Tuesday. "The increase of 1,446 Bcf in working gas inventory during the 2012 injection season (from the beginning of April through the end of October) is small by historical standards. Last year's inventory build from April through October, for comparison, was 2,224 Bcf."

The agency expects natural gas consumption to average 69.70 Bcf/d in 2012, an increase of 3.2 Bcf/d (4.8%) from 2011, with projected consumption decreasing to 69.41 Bcf/d in 2013. Consumption by the electric power sector, which increased to 25.16 Bcf/d this year from 20.75 Bcf/d in 2011, will slip back to 22.55 Bcf/d in 2013, EIA said.

The agency revised upward its forecast for marketed production for 2012 by 0.4 Bcf/d to 69.2 Bcf/d, based on both a recovery from Hurricane-related declines in August and a reversal of several months of declines earlier in the year. "While the revision is relatively small, the cause of the revision is significant," EIA said.

"...At 69.4 Bcf/d, marketed production in September was slightly higher than January 2012 and the highest since February 1973, despite the decline in the natural gas rig count this year." According to the Baker Hughes Rotary Rig Count, the natural gas rig count was 417 as of Dec. 7, compared with 811 at the start of 2012. Growth in associated gas from crude oil production and continued drilling in liquids-rich areas will continue to offset declines in drilling activity, according to EIA, which expects total marketed production to average 69.6 Bcf/d in 2013.

Liquefied natural gas imports are expected to remain at minimal levels of less than 0.5 Bcf/d in both 2012 and 2013," the agency said.

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