The Natural Gas Supply Association contends that US gas supplies should be ample for the upcoming heating season.
NGSA predicted in a new report that US gas demand will slide 2.1%, or 250 bcf, to 11.44 tcf, assuming that the nation's economic recovery is delayed by uncertainty over military events in the Middle East.
The report said residential and commercial demand is likely to drop 395 bcf (6.6%) this winter to 5.599 tcf, industrial use is projected to slip 176 bcf (4.8%) to 3.524 tcf, electric generation demand is expected to jump 338 bcf (29.6%) to 1.481 tcf, and production-pipeline consumption is forecast to slide 17 bcf (2%) to 841 bcf.
R. Skip Horvath, NGSA president, said, "Our analysis reveals a dramatically different natural gas market than this time last year, when we were expecting and experienced a rough winter heating season. While the fundamentals that drive the natural gas market all pointed toward higher prices last year, this year's fundamentals reveal a much-improved scenario for consumers this winter.
"The economy is weak, greatly slowing demand for natural gas. In fact, since the tragic events of Sept. 11, we updated our analysis to reflect that the industrial demand we expected to come online is now delayed."
This year vs. last year
NGSA noted that last year, record cold in November and December drove up spot market prices. It said that, although cold weather in the Northeast and Midwest regions may be volatile at times, temperatures are expected to be within the normal range.
Horvath said gas production is 1 bcfd higher than a year ago, enough to heat 4.3 million more homes and decreasing price pressure on the market.
He said, "Prices are at their lowest point since April 1999, a date in our industry that marks the end of our last very low price cycle. As a result, we are seeing a decrease in the rig count as capital is being reallocated to reflect market conditions."
NGSA said demand is flat and would be down except for electric generation coming online this year, helping to replace lost demand from industrial, commercial, and residential customers.
It said that, unlike a year ago, storage is almost full. Forecasters are predicting the US will end the storage season Nov. 1 with 500 bcf more than last year.
Horvath said, "The fundamentals that move the natural gas market paint a very good picture for consumers this year. However, we have to consider market wild cards, things we cannot predict, such as escalation of our military preparedness, and how these circumstances affect the market.
"A competitive market has only been in place since 1993, after the Persian Gulf War, which leaves us with little experience for comparison.
"Although wild cards do exist, for the short term at least, we do not expect sustained price volatility. In the long run, in order to overcome a fundamental tightness of supply, we must still overcome barriers to exploration and production to ensure a robust natural gas supply."
