Due to moderately higher fuel prices and anticipated milder weather for the upcoming heating season, only a modest rise in household heating bills is expected for many U.S. customers this winter, according to the Short-Term and Winter Fuels Energy Outlook released by the Energy Information Administration (EIA) last Wednesday.
The agency projects average household expenditures for space-heating fuels will total $986 during the 2010-2011 heating season (Nov. 1 through March 31), an increase of $24, or 2.5%, from last winter. The EIA said it sees higher costs for all fuels, except electricity, which is expected to be $18 less than last winter.
Households heating primarily with natural gas will likely see a $27 increase (4% hike) in their winter heating bills due to a 6% rise in prices. About 52% of U.S. households depend on natural gas as their primary heating fuel.
Households heating with heating oil and propane are projected to spend significantly more this winter — $220 and $136 more than in the heating season of 2009-2010, respectively, the EIA said. These higher bills primarily reflect higher fuel prices, although expected colder weather than last winter in the Northeast will also contribute to more fuel use, it said.
Henry Hub spot prices “are expected to remain below $4/MMBtu in October, but rise to $4.68/MMBtu by January as space-heating demand increases this winter. EIA has revised its projections for natural gas prices downward through 2011. Expectations are now for [an average] price of $4.16/MMBtu for the last quarter of 2010, 27 cents/MMBtu (6%) lower than last month’s outlook, based on several weeks of strong inventory builds,” the EIA said. For the entire year it sees Henry Hub prices averaging $4.47/MMBtu.
The EIA said it now sees prices in 2011 averaging $4.58/MMBtu, which is 18 cents/MMBtu (4%) lower than last month’s forecast, primarily due to a strong domestic production forecast.
Marketed natural gas production in the Lower 48 states is expected to rise by 3.5% to 61.29 Bcf/d this year from 59.98 Bcf/d a year ago, according to the EIA. “The increase in the natural gas-directed drilling rig count since mid-2009, comprised of a growing share of natural gas-directed horizontal rigs in the Lower 48 states, contributed to the production growth in 2010. Over the last year, the natural gas rig count increased from 712 on Oct. 2, 2009 to 962 on Oct. 1, 2010, according to Baker Hughes. However, the pace of drilling for natural gas is expected to moderate slightly over the forecast period. The favored spread between petroleum liquids and natural gas prices has also favored a shift towards drilling in shale formations that contain a higher proportion of liquids,” the EIA said.
The agency sees domestic marketed gas production dropping by 1.5% to 60.37 Bcf/d in 2011, less than the 1.9% reduction forecast in last month’s short-term outlook.
For the year, the EIA sees Canadian pipeline imports and liquefied natural gas (LNG) imports falling slightly to 9.03 Bcf/d and 1.23 Bcf/d, respectively. “Growing domestic production and low U.S. prices relative to European and Asian markets have discouraged LNG imports. Nevertheless, EIA expects LNG imports to grow slightly in 2011 to 1.32 Bcf/d, a 7% increase.”
Fueled by growing demand in the industrial and electric generation sectors, the EIA expects demand to increase by 4.6% to 65.16 Bcf/d this year from 62.30 Bcf/d a year ago. It anticipates a smaller growth in demand in 2011 to 65.22 Bcf/d. “Consumption of natural gas in the industrial and electric power sectors makes up the bulk of the year-over-year increase in consumption in 2010,” the EIA said.
It sees industrial demand climbing to 17.93 Bcf/d this year from 16.89 Bcf/d last year, and demand in the electric sector rising to 20.30 Bcf/d from 18.87 Bcf/d in 2009. The EIA anticipates industrial demand rising further to 18.10 Bcf/d in 2011, while gas demand in the electric sector dips slightly to 20.07 Bcf/d next year.
The EIA said it expects gas inventories to be 3,726 Bcf at the end of this month, which marks the end of the traditional injection season. This year’s storage level at the start of the winter season will be about 3% lower than last year’s record-setting level, but it still represents the second highest underground storage level on record for the month of October. “Last year injections continued through November; however, this year EIA expects November inventories will end about 16 Bcf below October inventories,” the EIA said. . .
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