Natural gas spot prices, which averaged $2.75/MMBtu at the Henry Hub last year and $3.33 last month, are expected to climb to an average of $3.41 this year and $3.63 in 2014, according to the Energy Information Administration (EIA).
The 2013 price forecast included in EIA's latest Short-Term Energy Outlook, which was released Tuesday, is 12 cents lower than the agency forecast in February and 33 cents lower than forecast in January (see Shale Daily, Feb. 13). The agency's 2014 price forecast is also down from the previous Short-Term Energy Outlook, which had foreseen prices strengthening somewhat next year to average $3.84.
"EIA expects the Henry Hub natural gas price will gradually rise through the end of 2014, but remain below an average $4/MMBtu throughout the next two years," said EIA Administrator Adam Sieminski.
Even those restrained price increases are likely to contribute to a decline in the amount of natural gas used for electric power generation to 23.1 Bcf/d this year from 25.0 Bcf/d in 2012, and a further decline to 22.7 Bcf/d in 2014, EIA said. But overall natural gas consumption is expected to average about 70.0 Bcf/d in both 2013 and 2014, as it did in 2012.
"Forecasts for closer-to-average winter temperatures in 2013 and 2014 (compared with the record-warm temperatures in 2012) lead to increases in natural gas used for residential and commercial space heating," EIA said.
Projected natural gas marketed production is expected to increase to 69.6 Bcf/d this year, up from 69.1 Bcf/d in 2012, but is likely to remain flat in 2014, according to the report. EIA expects onshore production to increase slightly through 2014, while Gulf of Mexico production will decline over the same period. Another recent EIA report said output from shale plays helped boost natural gas production in the Lower 48 up to 72.70 Bcf/d in December, almost 1% (0.62 Bcf/d) over December 2011 (see Shale Daily, March 1). EIA said total U.S. production was 82.57 Bcf/d in December, down 0.7% (0.62 Bcf/d) compared with November but up about 0.6% (0.51 Bcf/d) compared with the year-ago period.
EIA expects the amount of natural gas in storage at the end of this month to be well above average.
"As the winter heating season comes to an end, EIA expects natural gas inventories at the close of March will total just under 2 Tcf," Sieminski said. "That is less than the unusually high 2.5 Tcf seen last year, but still more than the five-year average of 1.7 Tcf."
As of March 1, working gas stocks totaled 2.08 Tcf, which was 361 Bcf less than at the same time last year but 269 Bcf more than the five-year average, according to EIA's Weekly Gas Storage Report.
Natural gas pipeline gross imports, which have declined over the last five years, are projected to remain near their 2012 level over the next two years, and liquefied natural gas imports are expected to remain at minimal levels, less than 0.5 Bcf/d, in both 2013 and 2014, EIA said.