The Energy Information Administration continues to be bearish ongas wellhead prices this year but expects prices to remain abovethe $2/Mcf mark because of the possibility that temperatures willbe higher than normal this summer and coal delivery problems maypersist in Texas. In its May Short Term Energy Outlook, the EIAsaid it expects wellhead prices to average $2.15/Mcf this year,down 3.6% from the $2.23/Mcf average in 1997.

“One thing that appears to have tempered bullish sentimentregarding gas prices recently is the realization that gas instorage for the end of April exceeded our previous projections andis comfortably ahead of last year,” EIA noted (377 Bcf ahead as ofMay 1, according to the AGA). “These relatively high storage levelsshould obviate the necessity for strong storage injections in theearly summer, perhaps leaving more of current supply for use inpower generation without heavy additional pressure on spot prices,”it said. “Despite a retreat from previously expected summer prices,it is noteworthy that the lowest quarterly price for this year mayhave already been seen in the normally high-priced first quarter.”

EIA expects gas demand for 1998 (21.92 Tcf) and 1999 (23.11 Tcf)to be somewhat lower than previously forecast in its April outlook(22.05 Tcf and 23.20 Tcf, respectively) because of generally mildweather through April and new data in January showing anoverestimate there in last month’s report. “Despite expectedincreases in electric utility and industrial gas use this year, thestrong dampening effects on demand of the mild winter is expectedto leave net gas demand growth for 1998 at about zero,” EIA said.”Even this would compare positively to the net downturn in gasdemand seen in 1997. The apparent lack of strong gas productiongrowth in recent months has thus not resulted in any extremely highgas prices, and storage has been bolstered by the lack of demandgrowth.”

The projections for net natural gas imports have been loweredsince the last report and may be expected to remain about flat forthe year 1998 because of the weak winter demand and pipelinerestraints.

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