EIA forecasts gradual improvement in US gas markets

Nick Snow
OGJ Washington Editor

WASHINGTON, DC, Feb. 11 -- US natural gas markets should gradually improve during 2010 with modest demand growth, lower production and imports, and higher prices, the US Energy Information Administration suggested in its latest Short-Term Energy Outlook.

“EIA expects total natural gas consumption to increase 0.4% to 62.5 bcfd in 2010 and another 0.4% in 2011,” EIA said Feb. 10 in its latest monthly outlook. It also forecast that total marketed gas production will decline 2.6% to 58.7 bcfd in 2010 and increase by 1.3% in 2011.

Projected US pipeline imports will fall by 8.3%, or 700 MMcfd, to 8.1 bcfd this year from the sustained impact of lower Canadian drilling and production and from increasing demand from oil sands projects in western Canada, EIA said. “A portion of the decline in pipeline imports this year is expected to be offset by imports of [LNG], which were double year-ago levels in January as temperatures plummeted and prices jumped,” it added.

EIA said very cold weather during January’s first half, particularly in the Southeast, contributed to an 8.4% jump in its monthly estimate of demand to generate electricity from its previous forecast. “The latest estimate for electric power consumption in January would be a new record for the month,” it indicated.

While demand for gas to produce power has been strong so far this year, EIA said an expected increase in coal-fired generation capacity and higher gas prices later in 2010 should reduce gas’s share of the baseload power mix by 1.3% despite lower-than-normal snowpack in the Northwest which could lower hydroelectric generation there by 8% and boost demand for gas.

It said that it anticipates stronger residential, commercial, and industrial demand to more than offset a drop in consumption for power generation, leading to the 0.4% rise in overall domestic gas demand. The strongest growth is expected from industrial customers as a result of improved economic conditions, EIA said.

Production outlook 
According to EIA, the impact of continued lower drilling activity, following the number of working US gas rigs hitting a low of 665 in mid-July 2009, will contribute to the 2.6% production decline it forecast for 2010. “While the number of working gas rigs is currently about 25% below the year-ago level, [it] has increased during the last month by about 100 rigs to a total of 861 at the end of January,” it said.

Current 2010 futures prices of $5.50-6.70/MMbtu “appear to provide the necessary economic incentive to expand drilling programs even further,” it added. “As a result, EIA expects monthly gas production to begin to slowly increase later this year and continue on an upward trend through the end of 2011.”

Total gas in storage was 2,406 bcf on Jan. 29, 150 bcf more than the previous 5-year average and 199 bcf higher than the comparable 1999 week’s level, the forecast noted. “Colder-than-normal temperatures in the first half of January led to the largest consecutive-week withdrawal on record as a total of 511 bcf was pulled from storage,” it said. Withdrawals for the 2 weeks ended Jan. 15 were a combined 317 bcf above the average withdrawal for the corresponding weeks over the previous 5 years, it observed.

Considerably warmer temperatures during January’s final 2 weeks led to withdrawals totaling 201 bcf, compared to the previous 5-year average of 357 bcf for the comparable period, EIA said. It said that it anticipates working gas inventories will finish 2010’s first quarter at about 1,644 bcf, or 7% higher than the 2005-09 average.

The Henry Hub spot price averaged $5.83/MMbtu in January, 49¢ more than December’s average spot price and 36¢ higher than January’s forecast price in last month’s STEO, according to the forecast. The spot gas price peaked at $7.51/MMbtu on Jan. 7 as colder weather tightened its grip on much of the country, then fell to about $5.30/MMbtu by the end of the month as temperatures eased, it said.

EIA said that it expects the Henry Hub spot price to average $5.37/MMbtu in 2010 and $5.86/MMbtu in 2011, with relatively high inventories and increased domestic production keeping prices from rising too dramatically.

Contact Nick Snow at nicks@pennwell.com.

Related Articles

Oil-price collapse may aggravate producing nations’ other problems

02/05/2015 The recent global crude-oil price plunge could be aggravating underlying problems in Mexico, Colombia, and other Western Hemisphere producing natio...

Alberta’s premier seeks more North American energy integration

02/05/2015 Better policy integration and cooperation will be needed for Canada, Mexico, and the US to fully realize the North American energy renaissance’s po...

EPA suggests DOS reconsider Keystone XL climate impact conclusions

02/03/2015 The US Department of State might want to reconsider its conclusions regarding potential climate impacts from the proposed Keystone XL crude oil pip...

Syncrude sees additional $260-400 million in possible budget cuts

02/02/2015 The estimate for capital expenditures has also been reduced to $451 million net to COS, which includes $104 million of remaining expenditures on ma...

Novel upgrading technology cuts diluent use, capital costs

02/02/2015 A novel bitumen upgrading process that decreases the amount of diluent required for pipeline transportation and reduces overall operating costs has...

BHI: Texas anchors 90-unit plunge in US rig count

01/30/2015 The US drilling rig count plunged 90 units—a majority of which were in Texas—to settle at 1,543 rigs working during the week ended Jan. 30, Baker H...

Oxy cuts capital budget by a third

01/30/2015 In the midst of falling oil prices, Occidental Petroleum Corp., Houston, expects to reduce its total capital spending for 2015 to $5.8 billion from...

Cenovus trims additional $700 million from capital budget

01/28/2015 Cenovus Energy Inc., Calgary, will defer $700 million in additional capital expenditures originally planned for 2015 until crude oil prices recover...

Pengrowth cuts capital spending due to declining oil prices

01/23/2015 The recent “rapid” decline in world oil prices is the main reason given by Pengrowth Energy Corp., Calgary, for setting its 2015 capital budget at ...
White Papers

Three Tips to Improve Safety in the Oil Field

Working oil fields will always be tough work with inherent risks. There’s no getting around that. Ther...
Sponsored by

Pipeline Integrity: Best Practices to Prevent, Detect, and Mitigate Commodity Releases

Commodity releases can have catastrophic consequences, so ensuring pipeline integrity is crucial for p...
Sponsored by

AVEVA’s Digital Asset Approach - Defining a new era of collaboration in capital projects and asset operations

There is constant, intensive change in the capital projects and asset life cycle management. New chall...
Sponsored by

Transforming the Oil and Gas Industry with EPPM

With budgets in the billions, timelines spanning years, and life cycles extending over decades, oil an...
Sponsored by

Asset Decommissioning in Oil & Gas: Transforming Business

Asset intensive organizations like Oil and Gas have their own industry specific challenges when it com...
Sponsored by

Squeezing the Green: How to Cut Petroleum Downstream Costs and Optimize Processing Efficiencies with Enterprise Project Portfolio Management Solutions

As the downstream petroleum industry grapples with change in every sector and at every level, includin...
Sponsored by

7 Steps to Improve Oil & Gas Asset Decommissioning

Global competition and volatile markets are creating a challenging business climate for project based ...
Sponsored by

The impact of aging infrastructure in process manufacturing industries

Process manufacturing companies in the oil and gas, utilities, chemicals and natural resource industri...
Sponsored by
Available Webcasts


OGJ's Midyear Forecast 2015

When Fri, Jul 10, 2015

This webcast is to be presented by OGJ Editor Bob Tippee and Senior Economic Editor Conglin Xu.  They will summarize the Midyear Forecast projections in key categories, note important changes from January’s forecasts, and examine reasons for the adjustments.

register:WEBCAST


Predictive Analytics in your digital oilfield - Optimize Production Yield and Reduce Operational Costs

When Tue, Jul 7, 2015

Putting predictive analytics to work in your oilfield can help you anticipate failures, plan and schedule work in advance, eliminate emergency work and catastrophic failures, and at the same time you can optimize working capital and improve resource utilization.  When you apply analytic capabilities to critical production assets it is possible to reduce non-productive time and increase your yield.

Learn how IBM's analytics capabilities can be applied to critical production assets with the goal of reducing non-productive time, increasing yield and reducing operations costs.

register:WEBCAST



On Demand

Cognitive Solutions for Upstream Oil and Gas

Fri, Jun 12, 2015

The oil & gas sector is under pressure on all sides. Reserves are limited and it’s becoming increasingly expensive to find and extract new resources. Margins are already being squeezed in an industry where one wrong decision can cost millions. Analyzing data used in energy exploration can save millions of dollars as we develop ways to predict where and how to extract the world’s massive energy reserves.

This session with IBM Subject Matter Experts will discuss how IBM Cognitive Solutions contribute to the oil and gas industry using predictive analytics and cognitive computing, as well as real time streaming for exploration and drilling.

register:WEBCAST


The Alternative Fuel Movement: Four Need-to-Know Excise Tax Complexities

Thu, Jun 4, 2015

Discussion on how to approach, and ultimately embrace, the alternative fuel market by pulling back the veil on excise tax complexities. Taxes may be an aggravating part of daily operations, but their accuracy is crucial in your path towards business success.

register:WEBCAST


Emerson Micro Motion Videos

Careers at TOTAL

Careers at TOTAL - Videos

More than 600 job openings are now online, watch videos and learn more!

 

Click Here to Watch

Other Oil & Gas Industry Jobs

Search More Job Listings >>
Stay Connected