The Energy Information Administration is projecting gas demandin fourth quarter to be 5-6% lower than it was in 4Q97, which was acolder-than-normal quarter. It sees 8.9% fewer heating degree-daysthis quarter than during the prior year’s period. All sectors areshowing lower gas demand in this quarter, except for electricutility gas demand, which may hold to levels seen in 4Q97. Overallnatural gas demand growth this year is now projected to be 2.9%below the 1997 level.

“On the assumption that weather conditions will be normal duringthe remainder of the heating season and through 1999, we are stillprojecting broad growth in gas demand next year. An expected growthrate for total gas demand of 4.1% now characterizes our base caseoutlook for 1999,” EIA said in announcing its December Short TermEnergy Outlook. “Because most of this growth is predicated onnormal levels of heating demand over the next 3 to 4 months, acontinuation of above-normal temperatures in key heating regions ofthe United States could drastically reduce or eliminate the kind ofsignificant recovery in gas demand shown in the base case for1999.”

The very warm weather in November and December is expected tohave a lasting impact on storage levels well into next year. “Giventhis inventory overhang, we are lowering our price projections froman annual average wellhead price of $2.10/Mcf in the previousoutlook, to about $1.90/Mcf. Prices above $2/Mcf are not expectedto appear until the fourth quarter of next year.”

EIA expects average annual natural gas wellhead prices willdecline 15% this year from the 1997 annual average. Some of thedecline stems from a 24% drop during the in the unseasonably warmfirst quarter of this year, but prices for the fourth quarter areprojected to be about 26% lower than the fourth quarter of 1997.

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