Natural gas demand rose significantly in the first quarter compared to the same period a year ago, setting the stage for a spurt in annual gas consumption, the Energy Information Administration (EIA) said in its Short-Term Energy Outlook for May.

Total gas consumption rose by more than 10% to 7.14 Tcf during the first three months of the year from 6.47 Tcf in the first quarter of 2006, according to the EIA report, which was released Tuesday. "Colder weather through the first four months of the year compared with last year (13% more heating degree days) has prompted a rise in expectations for total natural gas consumption in 2007," the agency said.

For the year, the EIA expects natural gas demand to rise by 3.4% to 22.63 Tcf from 21.88 Tcf in 2006, and by 0.9% to 22.84 Tcf in 2008. In its April forecast, the agency estimated that gas demand this year would rise 2.5%, or by 540 Bcf, above 2006 levels (see Daily GPI, April 11).

"Support from colder-than-normal weather in April (heating degree days were 14% above normal) pushed the average Henry Hub natural gas spot price from an average of $7.32/Mcf in March to an April average of $7.83/Mcf. Despite the recent surge, prices are expected to dip in May before rising over the next several months," the EIA said. It anticipates spot prices to average $7.84/Mcf this year, 90 cents above the 2006 average, and $8.16/Mcf in 2008.

Gas in storage was a mixed bag. For the week ending April 27, the EIA reported that working gas in storage was 1,651 Bcf, 266 Bcf above the five-year average but 245 Bcf below the level from the corresponding week a year ago.

Domestic dry natural gas production rose 1.3% to 4.59 Tcf in the first quarter, compared to 4.53 Tcf for the same period a year ago, the EIA said. On an annual basis, dry gas production is projected to increase by 0.9% to 18.67 Tcf this year compared to 18.51 Tcf in 2006, and by 1.4% to 18.93 Tcf in 2008, according to the agency.

Imports of liquefied natural gas (LNG) are estimated to have risen by more than 60% to 180 Bcf in the first quarter, the EIA reported. "LNG shipments are projected to remain strong throughout the forecast period, reaching 790 Bcf in 2007 and more than 1,000 Bcf in 2008. Higher U.S. prices relative to those in other LNG-consuming countries have spurred the recent surge in LNG imports and should continue to drive growth in the near term."

©Copyright 2007 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.