07 April 2005 20:33 [Source: ICIS news]
WASHINGTON (CNI)--The cost of natural gas in March was 26% higher than the same month last year, the US Department of Energy (DoE) said Thursday, reaching an average above $7/thousand cubic feet (mcf) for the Henry Hub spot price in March.
And DoE said that the cost of natgas is likely to stay in the $7 range through this year and next - unless it goes higher.
The average price for spot gas at the Henry Hub in March last year was $5.55, according to DoE.
In its short-term energy outlook today, DoE’s Energy Information Administration (EIA) said high crude oil prices and unusually cold weather for much of the US last month combined to raise heating demand and boosted spot prices for natural gas “to levels above $7” in March.
EIA said that even though spot prices for natgas may dip slightly during the seasonally lower demand period of the North American summer, “supply conditions are expected to remain tight over the same [summer] period.”
These high prices, said EIA, will hold despite adequate inventories of natural gas.
“Although natural gas storage remains adequate,” EIA said, “high world oil prices [and] a continued strong economy” will keep upward pricing pressure on North American natural gas. The agency also said that an anticipated decline in output from Pacific Northwest hydroelectric plants is contributing to upward pricing pressure for natgas as power generators draw on gas to help make up the shortfall in ?xml:namespace>
Consequently, said EIA, Henry Hub prices “are expected to remain relatively high, averaging about $6.95/mcf this year and $6.90 in 2006.”
In 2006, said
In addition, EIA said prices for West Texas Intermediate (WTI) crude oil in the first quarter this year were up by a solid 41% compared with the year-ago first quarter, reaching $49.77 compared with $35.27 in first quarter 2004 - a $14.50/bbl boost.
And EIA also is projecting that, like natgas, oil prices are likely to remain high through this year and into 2006.
“Several factors have contributed to the recent high crude oil prices,” said EIA, “and are likely to keep prices at or near present highs.” EIA blamed continued growth in worldwide oil demand that will outpace growth in oil output among countries that are not part of the Organization of Petroleum Exporting Countries (Opec).
In addition, “worldwide spare crude oil production capacity has recently diminished and is projected to remain low,” EIA said, adding that “Geo-political risks, such as the continued insurgency in
While high oil prices indirectly benefit US chemical manufacturers dependent on natural gas feedstocks, continued high energy prices worldwide threaten economic growth and therefore the market for chemicals.
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