US DOE sees natural gas prices climbing toward $4

10 October 2012 19:03  [Source: ICIS news]

Natural gas prices expected to riseWASHINGTON (ICIS)--The US said on Wednesday it expects domestic natural gas prices to rise in 2013 as use for the fuel is expected to climb in residential, commercial and industrial sectors along with continued high consumption among utilities.

In its monthly short-term energy outlook (STEO), the Energy Information Administration (EIA) said it expects the spot price for US natural gas to average $3.35/MMBtu in 2013, an increase of 64 cents from the expected 2012 average spot price of $2.71/MMBtu.

The EIA is the data collection and analysis arm of the Department of Energy (DOE).

If US natgas prices were to climb back to the $3.35 range next year, they would be within 65 cents of the 2011 average of $4.00/MMBtu.

Natural gas industry officials have forecast that US gas prices will climb to the $4-6/MMBtu range before long, citing increased electric utility use of the fuel and growing interest in use of natgas as a transportation fuel.

The availability and price of natural gas is of critical importance for the US petrochemicals industry and downstream chemical makers because they rely heavily on natgas as a feedstock and as an energy fuel.

The ongoing expansion of shale gas development has brought natgas prices down to levels not seen since the 1980s, and they have fuelled a new renaissance in US petrochemicals production.

The EIA said that while electric utilities saw large gains in the use of natural gas as a power generator this year, the pace of that increase is expected to ease in 2013 as natgas prices increase.

“Projected higher natural gas prices contribute to a 10.4% decline in forecast natural gas consumption in the electric power sector in 2013,” the STEO report said.

Nevertheless, “natural gas consumption in the power sector next year is still expected to be about 1.9bn cubic feet per day (bcf/d) higher than 2011 levels and high by historical standards”, the analysis said.

Electric utilities have accelerated their longstanding switch to natgas from coal-fired power generation, especially as new federal environmental regulations are raising costs for coal-dependent utilities and forcing the shutdown of some generators.

Although utilities’ use of natgas is expected to decline somewhat next year, that downturn in consumption will be more than offset by increased use of the fuel in the residential, commercial and industrial sectors, the report said.

A more normal North American winter season will drive increased natgas consumption in residential and commercial sectors, the EIA said.

While the 2012-2013 winter season is expected to bring normal cold temperatures, the period will be much colder than last winter’s abnormally warm weather, the report said.

Gains in industrial consumption forecast for next year are attributed to an improving US domestic economy, including expanding use of natgas in the nation’s newly expanding petrochemicals sector.

Paul Hodges studies key influences shaping the chemical industry in Chemicals and the Economy

By: Joe Kamalick
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