The U.S. Energy Information Administration (EIA) published its monthly short term energy outlook this past week. We will highlight the major projections that affect the energy markets and compare with what they published the previous month.
Natural Gas consumption is expected to average 69.9 billion cubic feet per day (Bcf/d) in 2012. If this forecast is accurate it would be a increase of 3.3 Bcf/d or 4.9% from 2011. This increase in consumption will be a function of increased use of natural gas in the electric power sector. The increased consumption is believed to grow by 21% in 2012.
The latest projection for daily consumption in 2013 is reported to be 71.1 Bcf/d, which is slightly lower than last month’s forecast of 71.3 Bcf/d. The overall increase is expected to be driven by weather patterns for the upcoming winter returning to closer-to-normal temperatures. It is believed that residential and commercial consumption will be up 7.7% and 4.5%, respectively.
The EIA reports that total natural gas (NG) production grew in 2011 by 7.9% or 4.8 Bcf/d. They have estimated that there is a 70% probability that a total shut in NG production could occur in the Gulf of Mexico during the 2012 hurricane season. The overall impact of a shutdown has diminished somewhat do to the increase in shale production and historically high storage numbers. The numbers are indicating that inventory levels will set new records at the end of October 2012, reaching above 4,000 Bcf.
Forecast indicates NG prices will move slightly higher off the lows it has seen thus far in 2012. Natural Gas spot prices averaged $2.47 per MMBtu for the month of June, and are expected to average $2.58 per MMBtu for the year. They also forecasted that average price of $3.12 per MMBtu for 2013 spot price.
Expectations are that NG prices will rebound slightly in 2013. It may be prudent to take advantage of the recent low prices we have seen so far this year. Putting together an energy strategy and taking some risk off the table should be beneficial for businesses bottom line.