Relief signs seen in US summer gas market

May 31, 2006
Record underground storage at the start of the US cooling season and prospects for milder, but still above-average, temperatures could give natural gas consumers relief in 2006 after four summers of rising costs, the Natural Gas Supply Association says.

Nick Snow
Washington Correspondent

WASHINGTON, DC, May 31 -- Record underground storage at the start of the US cooling season and prospects for milder, but still above-average, temperatures could give natural gas consumers relief in 2006 after four summers of rising costs, the Natural Gas Supply Association says.

But US markets still could feel pressure from hurricanes and potential overseas supply disruptions, NGSA warned as it issued its summer gas outlook.

NGSA Chairman Chris Conway told reporters that projected gas demand is close to last summer's level.

"Cooler weather this summer will likely result in lower demand for electricity and, consequently, lower levels of gas-fired generation, leaving room for the return of some industrial demand," he said.

NGSA expects consumption per residential customer to decrease while the number of residential customers increases.

Conway, president of the gas and power division at ConocoPhillips, said the National Oceanic and Atmospheric Administration expects summer temperatures to be 15.7% higher than normal but below year's record levels.

Record-high storage
NGSA said gas in storage is approaching a record 1.695 tcf as summer begins, compared with 1.249 tcf last year at this time.

Weekly injections in coming months thus could average 59.7 bcf, nearly 7.9% less than last summer, which would reduce pressure on prices, NGSA said.

Conway said unusually high storage levels at summer's end could lead to some wells being shut in.

NGSA expects overall US gas consumption to fall by 0.2% to 51.3 bcfd this summer, with electric generation representing the only swing demand sector.

It projects a 1% rise in US gas production to an average 50.4 bcfd and a 2% increase in liquefied natural gas imports to an average 1.6 bcfd this summer. Canadian imports are expected to fall 8.5% to an average 1.8 bcfd. Total average US supply will increase 0.2% to an average 59.6 bcfd.

Contact Nick Snow at [email protected].