Corrected: US predicts natgas prices will increase by 17% in 2010

08 December 2009 22:14  [Source: ICIS news]

Correction: In the ICIS news story headlined “US predicts natgas prices will increase by 17% in 2010” dated 8 December 2009, please read in the first paragraph … as domestic output falls while a drop in consumption softens … instead of … as consumption rises and domestic output falls …. Please read in the fourth paragraph … The anticipated modest gas consumption decline in 2010, in contrast with a much sharper drop seen in 2009, in part reflects a recovering US economy … instead of … The anticipated modest gas consumption decline in 2010 in part reflects a recovering US economy .…A corrected story follows.

WASHINGTON (ICIS news)--The Energy Department said on Tuesday it expects US natural gas prices to climb by 17% in 2010 to a yearly average of $4.62/MMBtu from this year’s average of $3.95/MMBtu as domestic output falls while a drop in consumption softens.

In its monthly short-term energy outlook, the department's Energy Information Administration (EIA) said that it expects the annual average natural gas Henry Hub spot price next year to be $0.67/MMBtu higher even though overall gas consumption in 2010 is forecast to edge downward by 0.4%.

The availability and cost of natural gas are of crucial interest to the US petrochemical sector and downstream chemical makers because they are heavily dependent on natgas as both a feedstock and energy fuel.

The anticipated modest gas consumption decline in 2010, in contrast with a much sharper drop seen in 2009, in part reflects a recovering US economy. The decline in gas consumption this year is expected to show a nearly 2% drop.

The 2009 fall in gas consumption would have been sharper, the department said, except that significant declines in residential and commercial usage were partially offset by the increased use of gas as an electricity generating fuel.

Expectations for an increased pace in the economic recovery next year will drive gas consumption gains in the residential, commercial and industrial sectors, the department said.

While consumption is expected to increase next year relative to 2009, domestic gas production in contrast is forecast to fall.

The department said that following a US gas production increase of 3.7% this year, domestic output in 2010 is expected to decline by 3.1%.

Rising demand amid decreasing production will account for the average $0.67/MMBtu price increase in the new year, the department’s outlook data indicate.

The department’s forecasts for US oil prices during the North American winter months and for 2010 as a whole are largely unchanged from its month-earlier outlook.

The US benchmark crude, West Texas Intermediate (WTI), is expected to average $76/bbl during the winter months of October through March, the department said. That forecast is just a dollar lower than the agency’s estimate last month.

WTI prices are forecast to rise to an average of $82/bbl by the end of 2010 as the global economic recovery gains strength, the department added. That price estimate is a dollar higher than the prediction offered by the department a month ago.

Paul Hodges studies key influencers shaping the chemical industry in Chemicals and the Economy
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By: Joe Kamalick
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