In its first forecast for 2014, the Energy Information Administration (EIA) said it expects natural gas prices to “gradually rise but still remain relatively low” over the next 24 months, with Henry Hub prices averaging $3.74/MMBtu this year and $3.90/MMBtu in 2014, compared with $2.75/MMBtu in 2012.
The $3.74/MMBtu forecast for 2013 is a 1.6% increase from the $3.68/MMBtu forecast EIA issued last month and a 7.2% increase from November’s EIA forecast of $3.49/MMBtu (see Daily GPI, Dec. 12, 2012; Nov. 7, 2012).
“Natural gas spot prices averaged $3.34/MMBtu at the Henry Hub in December 2012, down 20 cents/MMBtu from the November 2012 average and 17 cents/MMBtu more than the December 2011 average,” EIA said in its Short-Term Energy Outlook, which was released Tuesday. “The warm December partially led to the month-over-month decline in prices.”
EIA said natural gas futures prices for April 2013 delivery (in the five-day period ending Jan. 3) averaged $3.38/MMBtu. The lower and upper bounds for the 95% confidence interval for April 2013 contracts are $2.42/MMBtu and $4.73/MMBtu, respectively, compared to $2.15/MMBtu and $4.49/MMBtu at this time last year.
“The implication of higher natural gas prices in this forecast is that it tends to make coal more competitive, and so in the electricity area we have coal’s share of electricity generation actually going up from about 37.5% in 2012 to about 39% in 2013, and it should maybe go up a little bit more in 2014.” Natural gas is being priced “very competitively,” according to EIA Administrator Adam Sieminski, who said EIA expects natural gas’ share of the electricity generation market to grow “very robustly” longer term.
Natural gas inventories, which reached a weekly record high of 3,923 Bcf in early November, stood at 3,517 Bcf in the week ending Dec. 28 following a 135 Bcf withdrawal, 12.4% higher than the five-year average of 3,128 Bcf, according to the most recent EIA Weekly Gas Storage Report.
“So far this winter, withdrawals have been limited, mainly because of warmer-than-normal temperatures in December,” EIA said. “Five-year average weekly withdrawals in December are generally well above 100 Bcf, but that occurred only during the last week of the month.” Inventories posted a net injection of 2 Bcf for the week ending Dec. 7, only the third time a net injection has been reported in the month of December.
The agency expects natural gas consumption to be relatively unchanged at 69.7 Bcf/d in 2013, and to decrease marginally to 69.4 Bcf/d in 2014. Consumption by the power sector, which increased to 25.16 Bcf/d this year from 20.75 Bcf/d in 2011, will slip back to 22.55 Bcf/d in 2013, EIA said.
“Because of a warm winter last year, 2012 residential and commercial consumption was very low, and the hot summer (as well as relatively low natural gas prices) led to record high use of natural gas for power generation,” EIA said. “Forecasts for closer-to-normal temperatures in 2013 and 2014 will lead to increases in natural gas used for residential and commercial space heating. These increases are offset by declines in natural gas for power generation as summer temperatures are expected to be closer to normal, meaning cooler than they were in 2012.”
The agency expects total marketed production to increase to 69.8 Bcf/d in 2013 from 69.2 Bcf/d in 2012, and to drop slightly to 69.5 Bcf/d in 2014. EIA expects growth in Lower 48 onshore production, driven largely by production in the Marcellus Shale and other shale plays, will continue through 2014, and will be offset by Gulf of Mexico declines next year.
EIA said it expects pipeline gross imports will stay mostly flat this year and will drop by 0.4 Bcf/d (4.5%) in 2014. LNG imports are expected to remain at minimal levels of less than 0.5 Bcf/d through 2014.
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