With working natural gas inventories at a record high, the Henry Hub spot price is expected to average $2.77/MMBtu this year — a 31% decrease from $4.00/MMBtu in 2011 — but it is expected to rebound to an average of $3.49/MMBtu in 2013, the Energy Information Administration (EIA) said in its Short-Term Energy Outlook released Tuesday.

That’s more bullish than EIA’s previous Outlook, which forecast Henry Hub natural gas prices to average $2.71/MMBtu this year and $3.35/MMBtu in 2013 (see Daily GPI, Oct. 11).

For the week ending Oct. 26, working inventories totaled 3,908 Bcf, according to EIA’s Weekly Natural Gas Storage Report, a 136 Bcf increase over the corresponding week last year, 259 Bcf above the five-year average and 56 Bcf more than the previous record high, which was achieved Nov. 18, 2011. EIA said it expects inventories will total 3,935 Bcf as of Oct. 31, with injections likely to continue for a few weeks in November.

EIA said natural gas futures prices for February 2013 delivery (in the five-day period ending Nov. 1) averaged $3.86/MMBtu. The lower and upper bounds for the 95% confidence interval for February 2013 contracts are $2.76/MMBtu and $5.39/MMBtu, respectively, compared to $2.89/MMBtu and $5.45/MMBtu at this time last year.

The agency expects that natural gas consumption will average 69.7 Bcf/d in 2012, an increase of 3.2 Bcf/d (4.8%) from 2011, with projected consumption decreasing 0.5 Bcf/d (0.7%) in 2013.

“Large gains in electric power use in 2012 more than offset declines in residential and commercial use,” EIA said. “Projected consumption of natural gas in the electric power sector averages 25.4 Bcf/d in 2012, 22% higher than in 2011, primarily driven by the increased relative cost advantages of natural gas over coal for power generation in some regions…Expected declines in the electric power sector [in 2013 will] offset increases in residential, commercial and industrial consumption.”

EIA said last month that it expects U.S. households — one-half of which use natural gas as their primary heating fuel — to spend an average of $89 more this winter, reflecting a 1% increase in the average residential price from last winter and a 14% hike in consumption if near-normal (cold) temperatures materialize for the upcoming winter. Winter was unseasonably warm last year, resulting in little additional demand and weak prices. Going into the winter heating season, which started Nov. 1, EIA expects gas inventories to be at a record high: 3,903 Bcf.

Liquefied natural gas (LNG) imports are expected to fall by about half this year compared with 2011, the agency said.

“EIA expects that an average of slightly less than 0.5 Bcf/d will arrive in the United States (mainly at the Elba Island terminal in Georgia and the Everett terminal in New England) both in 2012 and 2013, either to fulfill long-term contract obligations or to take advantage of temporarily high local prices due to cold snaps and disruptions. Higher prices for LNG, particularly in Asian markets, have made the United States a market of last resort for LNG suppliers. Even as natural gas prices are expected to rise in the United States next year, prices in Japanese and Korean markets have historically been much higher,” EIA said.

Total marketed production of natural gas grew by 4.8 Bcf/d (7.9%) in 2011, according to EIA, which forecast that total marketed production growth will slow in 2012, and that 2013 production will be near the 2012 level.

“So far during 2012, production has fluctuated slightly around an average of 69 Bcf/d, in contrast to the strong upward growth seen between 2009 and 2011. EIA expects some small declines in production in the coming months, related to recent drops in the rig count.” The natural gas rig count was 424 as of Nov. 2, according to the Baker Hughes Rotary Rig Count, a 3% decline from the previous week and a 53% decline from a year ago.

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