The Energy Information Administration (EIA), in its short-term energy outlook for April, revised its projection for the average spot price of natural gas this year upwards by 4% to approximately $5.40/Mcf from the $5.19 that it had projected last month.

Its spot price forecast for natural gas is expected to stay “about the same” in 2005, the Department of Energy (DOE) agency said, adding that this was based on modest growth in domestic gas production (slightly more than 1%) occurring this year and next.

On a quarterly basis in 2004, the EIA said it sees the composite spot price for gas rising to $5.51/Mcf in the second quarter from $5.47 during the first period. It expects the composite spot price to fall to $5.24 in the third quarter and then rise to $5.68 toward the end of the year.

In the April forecast that was released Thursday, the agency estimated that U.S. gas production rose by about 0.6% to 19.62 Tcf last year, and that it was expected to inch up to 19.85 Tcf in 2004 and to 20.09 Tcf in 2005.

“Natural gas production is expected to continue to rise slightly through 2005 as natural gas well completions, which totaled an estimated 20,000 in 2003, continue to grow to between 22,000 and 23,000 wells per year over the next two years,” the EIA said.

It anticipates that total available supply (including gas and liquefied natural gas imports, and gas in storage) will increase modestly to 22.31 Tcf this year, compared to 21.78 Tcf in 2003.

“In 2004, natural gas demand is expected to increase by about 2.4% [to 24.14 Tcf] due to economic growth, weather factors and an overall increase in fuel oil prices relative to the average natural gas price.” EIA sees gas demand for the industrial sector, which experienced significant demand destruction last year due to high prices, growing to 8.41 Tcf from 8 Tcf in 2003. More modest growth is expected for the residential and commercial sectors this year, reaching a total of 5.04 Tcf and 3.27 Tcf, respectively.

As for gas in storage, the EIA reported that inventories were about 10% below the five-year average level at the end of March, but were 37% higher than last year at this time.

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