The frigid January weather that gripped the entire nation, particularly the Northeast, is “diminishing the likelihood” of cumulative heating costs for this heating season finishing below last winter’s high levels, the Energy Information Administration (EIA) said in its Short-Term Energy Outlook for February.

Natural gas-heated households are expected to experience the greatest increase in their winter bills — up by 11% over the winter of 2002-2003, the Department of Energy (DOE) agency said in its energy outlook, which was released last Tuesday. Residential gas prices began the winter at $9.36/Mcf, but are likely to hit $10.58 by the close of the season, it noted.

Propane-heated households can look forward to a 7% hike in their winter bills; electric-heated homes, an increase of about 2%; and the costs for households fueled with heating oil are expected to fall by 1%, the EIA noted. “These projections are national average values — actual heating bill changes may vary widely by region due to differences in weather and fuel price developments.”

The cold weather pushed up average monthly wholesale gas spot prices to $5.90/MMBtu in January, the EIA reported. “Despite the severe weather and some strong short-term price movements in January, natural gas storage has remained at least slightly above normal, and spot prices in early February have moved down towards $5.” It anticipates that composite spot gas prices will stay below the $5 level until the fourth quarter.

For the entire 2004, the agency sees gas prices averaging about $4.90/MMBtu, down “moderately” from last year. But it projects that gas spot prices will pick up some steam in 2005, averaging near $5/MMBtu if domestic and imported supply continue to grow by about 1% a year.

In 2003, “natural gas demand is estimated to have declined 3.7%…largely due to high prices discouraging demand in the industrial and electric power sectors,” the EIA said. It pegged 2003 demand at 21.8 Tcf, down from 22.64 Tcf in 2002.

“However, expected growth in the economy, along with somewhat lower projected annual average natural gas prices, are expected to push 2004 demand up by about 2.2%” to 22.28 Tcf.

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