While wellhead prices will be 40% stronger than last winter,high levels of storage and gas imports will keep them under $3 forthe better part of the heating season, the Energy InformationAdministration said in its October Short-Term Energy Outlook. Thereport was published last week.
“Our analysis indicates that storage levels are currently aboutequal to the relatively high levels of one year ago. This, inaddition to continued high levels of gas imports, leads to theexpectation that wellhead gas prices, while still trending wellabove last year’s levels, may remain below $3/Mcf this winterunless very cold weather intervenes,” the EIA said.
The EIA said net imports for 1999 and 2000 are expected to be3.33 Tcf and 3.6 Tcf respectively. Imports from Canada will play avital role in the increase, as the Alliance Pipeline is expected tobegin service in the near future, bringing 1.3 Bcf/d from Albertato Chicago.
Noting the abnormally high overall storage level of 3,176 Bcf atthe end of last October, the report said levels this year and in2000 will be “somewhat” lower. The most recent American GasAssociation report, released yesterday, said the storage level wasat 2,887 Bcf as of the last week of September.
The report also said that thanks to projected “normal weather,”gas demand will continue to grow through 2000, although it will doso at a continually slower pace. The EIA expects demand to increase2.4% and 2.3% respectively, to 21.86 Tcf in 1999 and 22.37 Tcf in2000. This reducing increase follows the path set in 1998, whendepressed oil prices were lower than prices for gas, causing manyindustrial customers to use oil to fuel their plants. In the nexttwo years, the EIA expects gas to be more competitive.
While demand is expected to rise this winter in the residential(10.2%), commercial (12.3%) and electric sectors (8.7%), the EIAexpects it to experience a 0.7% decrease in the industrial area.”The increase in natural gas demand is expected to be across allsectors, with the exception of the industrial sector… which isexpected to be down 0.7% from its relatively high 1998 level.”
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