The Energy Information Administration is projecting gas demandin the fourth quarter to be 5%-6% lower than it was in 4Q 1997,which was a colder-than-normal quarter. It sees 8.9% fewer heatingdegree-days this quarter than during the prior year’s period. Allsectors are showing lower gas demand in this quarter, except forelectric utility gas demand, which may hold to levels seen in 4Q1997. Overall natural gas demand growth this year is now projectedto 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 three to four months,a continuation of above-normal temperatures in key heating regionsof the United States could drastically reduce or eliminate the kindof significant recovery in gas demand shown in the base case for1999.”

Other experts see year-to-year demand losses as well. In August,Energy Security Analysis, Inc. (ESAI) said that demand for 4Q98would be 5.42 Tcf, an increase of over 200 Bcf from their 4Q97numbers. The warm weather has changed their tune, however, and ESAIis now forecasting 4Q98 demand to be 5.164 Tcf, representing a 1%downturn from 4Q97’s results. They are also predicting the averagecash price of gas for the last quarter in 1998 and the firstquarter of 1999 will not exceed $1.85.

WEFA (Wharton Econometric Forecasting Associates) reported inApril that 4Q 1998 demand would reach 5.75 Tcf, the highest of allthe groups providing numbers. Their latest numbers however, have4Q98 at 5.63 Tcf, which is 30 Bcf less than their 4Q97 results.WEFA is also saying that the annual cash price average for 1999will be $1.97. The American Gas Association will be issuing itsprojected demand figures Tuesday.

EIA said that the very warm weather in November and December isexpected to have a lasting impact on storage levels well into nextyear. “Given this inventory overhang, we are lowering our priceprojections from an annual average wellhead price of $2.10/Mcf inthe previous outlook, to about $1.90/Mcf. Prices above $2/Mcf arenot expected to 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 unseasonably warm firstquarter of this year, but prices for the fourth quarter areprojected to be about 26% lower than the fourth quarter of 1997.

John Norris

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