Henry Hub gas prices should average about $6.43/MMBtu this year, down about $2.37 from 2005 prices, mainly because storage is likely to end the heating season April 1 about 320 Bcf above 2005 levels, making for an easy injection season, according to consulting firm Energy and Environmental Analysis Inc.
EEA’s bearish projections, laid out in its Monthly Gas Update, echoed other recent forecasts by consultants, analysts and regulators (see Daily GPI, March 16, March 17). Since the beginning of the year, the gas market has lost more than 30% of its value, plunging from more than $10.60/MMBtu to $7.267 as of the close of Nymex gas futures trading on Thursday. Futures prices resumed a downward trajectory on Friday, leading many to conclude that the recent rebound represents merely a temporary rally in a bear market.
EEA said it expects storage to end the withdrawal season at 1.6 Tcf compared to 1.28 Tcf last April and 1.05 Tcf in April 2004. “If storage injections (April through October) average last year’s level of 9 Bcf/d, U.S. storage levels entering next heating season could exceed 3.5 Tcf, a recent historical high,” the consulting firm said. “Lower injections may reduce April-October natural gas prices below the projected average of $5.80 [over that period].”
While lower prices should lead to more demand, EEA projects that net gas consumption from summer power generation will lag the hot summer of 2005 by about 1.6 Bcf/d if this summer’s weather is normal. From June through September, gas consumption by the power sector is expected to average 17.2 Bcf/d versus the 18.8 Bcf/d in 2005.
EEA projects that Gulf production shut-ins from hurricane damage will average 600 MMcf/d this summer, falling to 300 MMcf/d by the next heating season. “We assume that the level in October and thereafter represents the amount of gas that is uneconomic to restore.”
LNG imports are expected to get a boost from the four new liquefaction trains that have been added in the Atlantic Basin in the past year. U.S. LNG imports are expected to average 1.9 Bcf/d, reaching 2.2 Bcf/d by December, up from an average of 1.7 Bcf/d in 2005. The start of Mexican LNG imports this year also is expected to reduce Mexico’s importation of U.S. gas, leaving more supply available for domestic markets. For more details from EEA’s report, go to www.eea-inc.com.
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