US revises natgas prices upward on demand growth

08 May 2007 18:32  [Source: ICIS news]

WASHINGTON (ICIS news)--The Energy Department on Tuesday revised upward its forecast for US natural gas prices for this year to an average $7.84/m Btu, nearly a dollar higher than last year, saying demand growth continues to exceed modest domestic production gains.

 

The department’s Energy Information Administration said in its monthly short-term energy outlook that the average cost for natural gas in the US will climb to $8.16/m Btu in 2008, a 4% increase from this year’s projected average cost.

 

The price and availability of natural gas are crucial concerns for the US chemicals industry, which is almost wholly dependent on gas as a feedstock.

 

In oil, the administration predicted that the average cost per barrel for benchmark West Texas Intermediate (WTI) crude will be $66 through the North American summer months, about $4/bbl less than the average cost of $70 seen last summer.

 

Last month, the administration had forecast that the summer season cost for WTI crude would be only $65/bbl.

 

For 2007 as a whole and for 2008, the department is predicting a WTI price average of about $64/bbl, largely in keeping with the department’s forecast last month.

 

In revising upward its forecast for natural gas prices, the administration noted that colder weather through the first four months of this year has raised consumption projections for the year as a whole.

 

Gas consumption was up more than 10% in the first quarter this year compared with the same period a year ago, the department said, adding that overall US natgas consumption is expected to increase by 3.4% this year.

 

Against that expected jump in gas consumption, US domestic production of natural gas is expected to increase by less than 1% this year.

 

To make up the difference and meet consumption growth, the department said imports of liquefied natural gas (LNG) are estimated to have increased by 60% in the first quarter this year compared with the year-earlier quarter to 180bn cubic feet (bcf).

 

LNG imports, said the department, are forecast to reach 790 bcf this year and more than 1trn cubic feet (tcf) in 2008.  However, amid strong global competition for LNG supplies, the increased imports will not mean lower prices, the administration said, noting that higher US natgas prices should continue to drive growth in LNG imports in the near term.

By: Joe Kamalick
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