Natural gas demand is expected to lag behind available gas supplies during the upcoming months, which will keep gas prices at a stable level this summer, according to the “Summer Outlook” issued by the Natural Gas Supply Association of America (NGSA).
“This is the third year in a row that we’ve seen a stable market for natural gas. We anticipate that the trend has legs not only because of the shale plays now being developed but because of all our supply sources,” said NGSA President R. Skip Horvath.
“We expect industrial demand to be our most significant growth sector this summer. Although not at pre-recession strength, primary metals demand for natural gas is climbing and seems poised for continued growth. At the same time, overall industrial demand for natural gas is positioned to match or surpass pre-recession levels,” Horvath said.
The NGSA outlook, which was based on data from Energy Ventures Analysis and the Energy Information Administration, projects that industrial demand will grow nearly 2% to 17.4 Bcf/d this summer from 17.1 Bcf/d during the same period a year ago.
It said another sector to watch is power generation, where it predicts that generation facilities will continue to switch to natural gas due to cratering gas prices. Switching from coal to natural gas averaged about 1.8 Bcf/d during the summer of 2010 and is expected to climb to 2.6 Bcf/d this summer, a 44% increase summer over summer and a record.
Despite the rampant growth in coal-to-gas switching, the NGSA outlook sees overall electric demand climbing by less than 1% to 22.8 Bcf/d this summer from 22.7 Bcf/d during summer 2010.
The NGSA projects that total demand will be 56.8 Bcf/d this summer, up 1.8% from 55.8 Bcf/d for the same period last year. The rise in gas demand is much lower than that which occurred between 2009 and 2010 (4.9%), according to the NGSA. The National Oceanic and Atmospheric Administration has predicted that this summer will be 18% cooler than last year, which will dampen air conditioning load.
While NGSA said it sees the average gas rig count falling significantly during the summer — from 967 to 900 — it expects average gas production to rise to 62.1 Bcf/d from 59.1 Bcf for the summer of 2010. In addition to production, it estimated that Canadian imports will average 6.2 Bcf/d and imports of liquefied natural gas will be approximately 0.8 Bcf/d, bringing total available supplies this summer to 69.1 Bcf/d.
Gas inventories will start the summer season at 1,579 Bcf, down from 1,669 Bcf at the start of summer 2010, the NGSA said. Storage will be approximately 3,900 Bcf at the start of the winter heating season on Nov. 1, up slightly from 3,840 Bcf. Weekly injections during the summer will average 75.6 Bcf compared to 71.4 Bcf during the summer of 2010.
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