Assuming normal weather for the remainder of winter, working gas in storage is expected to finish out the 2006-2007 heating season at the highest level since 1991, the Energy Information Administration (EIA) said in its Short-Term Energy Outlook for February.
The EIA, in its outlook released Tuesday, projects that working gas in storage will be approximately 1,720 Bcf at the end of the heating season (March 31), almost 40% above the five-year average and at the highest level for an end of the heating season in 16 years. The high amount of working gas in storage is due to the unseasonably warm weather at the end of 2006 and in January, which reduced demand for gas as a heating fuel.
At the end of January, working gas in storage stood at an estimated 2,571 Bcf, which is 152 Bcf above year-ago storage and 454 Bcf above the previous five-year average.
Due to the absence of winter-like weather for the November-through-January period, the EIA projections for U.S. heating fuel expenditures this winter have declined over the past couple of months. The agency now expects average household heating fuel expenditures this heating season to be $862, down from $948 last winter.
The warmer weather took its toll on spot gas prices in December and January, the EIA said. "Mild winter weather in the Northeast and Midwest early in the heating season reduced natural gas demand and tempered the Henry Hub spot price, which averaged $6.90/Mcf for December 2006 and $6.75/Mcf for January," it noted. Assuming normal weather for the forecast period, it projects that spot prices will average about $7.10/Mcf this year and $7.60/Mcf in 2008.
The EIA's projection for spot gas prices this year was slightly above its previous estimate ($7.06/Mcf), but its projection for 2008 prices was below its previous one of $7.72/Mcf (see Daily GPI, Jan. 10).
Natural gas demand is expected to climb by 2.7% this year to 22.57 Tcf from 21.97 Tcf in 2006, according to the EIA. A return to normal weather for the remainder of the year is likely to increase residential consumption by 7.8%. While hot summer weather contributed to a 6.9% increase in demand for natural gas by the electric power generation sector last year, a return to normal summer weather is expected to cause a 1% drop in gas consumption by generation this year, the agency said. Gas demand by the industrial sector is set to rise by 3% over the coming months, following a decline in gas consumption by 1.4% last year.
The EIA sees domestic production of dry natural gas rising 2.7% to 18.97 Tcf this year, and by 0.7% to 19.10 Tcf in 2008. Net imports of natural gas are estimated to have fallen 5.3% last year and are expected to rise by a modest 0.5% this year, then decrease by 7.9% in 2008, it noted. Declining pipeline imports of natural gas from Canada will be tempered by rising liquefied natural gas imports, which are expected to increase to 0.8 and 1.1 Tcf per year, respectively, this year and next.
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