EIA’s Short-Term Natural Gas Outlook: According to the agency’s...

EIA’s Short-Term Natural Gas Outlook: According to the agency’s Short-Term Energy Outlook, released July 11, 2006, the Energy Information Administration (EIA) expects that total U.S. natural gas consumption in 2006 will fall below 2005 levels by about 36 Bcf, or 1.7 percent. In 2007 total natural gas consumption is expected to reach 22.5 Tcf. Because of the record high temperatures in January, residential natural gas consumption in 2006 is projected to be 7.4 percent less than the 2005 level and then increase by 8.8 percent in 2007 to almost 4.9 Tcf. In 2005, domestic dry natural gas production declined by 2.7 percent, largely owing to hurricane-damaged infrastructure in the Gulf of Mexico. Dry natural gas production is projected to increase by 0.6 percent in 2006 and 1.1 percent in 2007 to 18.6 Tcf, however the expected increases in 2006 and 2007 are not large enough to offset the 2005 decline. Total liquefied natural gas (LNG) imports also are expected to increase, growing to 760 Bcf in 2006 and to 1 Tcf in 2007. The increased supply coupled with the decreased consumption will lead to a 14.1-percent decrease in the average annual Henry Hub spot price in 2006, which averaged $8.86 per Mcf in 2005 and is expected to average $7.61 per Mcf in 2006. Expected future supply tightness and continuing pressure from high crude oil prices likely will lead to higher natural gas spot prices next winter, with the Henry Hub spot price projected to average $9.35 per Mcf between November 2006 and March 2007. The Henry Hub spot price is expected to average $8.13 per Mcf in 2007. Natural gas inventories in underground storage are projected to reach about 3,445 Bcf by the beginning of the 2006-2007 natural gas heating season (November 1, 2006), which is 250 Bcf or 7.8 percent higher than the natural gas stocks at the onset of the 2005-2006 heating season.