The Energy Information Administration (EIA) in its Short-Term Energy Outlook for February has sharply downsized its prior projection for imports of liquefied natural gas (LNG) into the United States during 2008.
The Department of Energy agency, in a report released Tuesday, estimated that 788 Bcf of LNG will flow into the U.S. this year, down 149 Bcf from the 937 Bcf forecasted in January. The reduction “is due to the expectation of continued demand strength in Asia and Western Europe, which compete with the United States for marginal LNG supplies, and uncertainty about supply projects set to come on-line in late 2008 and early 2009,” the EIA said.
The agency expects Henry Hub spot natural gas prices to remain strong throughout the first quarter. It reported that spot prices averaged $8.25/Mcf in January, 92 cents/Mcf more than the average December spot price. “The expectation of continued cold, but near-normal weather through the remainder of the first quarter this year is projected to keep prices high relative to the first quarter of 2007.”
It sees the Henry Hub spot price averaging $8.18/Mcf during the first quarter compared to $7.41/Mcf during the comparable period last year. “As heating demand eases, the monthly average spot price at the Henry Hub is expected to decline through August before rising toward a peak again next winter. On an annual basis the Henry Hub spot price is [likely] to average about $7.83/Mcf in 2008 and $7.93/Mcf in 2009.”
On the demand side, the EIA projects that total gas consumption will rise by 0.9% to 63.44 Bcf/d this year and by 1% next year. “Consumption growth in 2008 is driven by the residential and commercial sectors because of the expected slightly colder winter months on average, while consumption in the electric power sector is expected to remain relatively unchanged due to the projected milder summer this year compared with last,” it said.
The EIA sees U.S. marketed natural gas production rising by 2.2% to 55.70 Bcf/d this year and by 0.8% in 2009. “Projected growth in 2008 is primarily due to the start-up of new deepwater supply infrastructure in the Gulf of Mexico and continued production growth from unconventional reserve basins in the Lower 48 onshore region.”
Working gas in storage at the start of the month was 2,062 Bcf, 82 Bcf above the five-year average and 317 Bcf below the level during the corresponding week in 2007, according to the agency.
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