Natural Gas

[december]

U.S. Natural Gas Markets

Prices. The Henry Hub natural gas price is projected to average $7.58 per thousand cubic feet (mcf) in 2007 compared with $7.10 in the previous Outlook (Henry Hub Natural Gas Price). For 2008, the Henry Hub spot price is projected to average $7.86 per mcf.

Production. Domestic dry natural gas production is expected to increase by 2.4 percent in 2007, a slight increase from production growth in 2006, as drilling for natural gas continues at historically high levels. Net imports of natural gas in 2007 are projected to drop for the second consecutive year, though a smaller decline is expected in 2007 (2.0 percent) than was observed in 2006 (5.0 percent). Pipeline imports from Canada are expected to fall by about 180 billion cubic feet (bcf) in 2007. However, EIA still expects total liquefied natural gas (LNG) imports to increase from their 2006 level of 580 bcf to 770 bcf in 2007. LNG import projections remain strong for 2008 as well, expanding by 39 percent and eclipsing the 1 trillion-cubic-foot mark.

Inventories. On February 23, 2007, working gas in storage stood at an estimated 1,733 bcf. Due to cold weather, a record amount of natural gas was withdrawn from storage in February. As a result, after 13 consecutive months of year-over-year increases, February stocks dropped below the year-ago level. Stocks are 263 bcf below the level at this time last year, but are still 179 bcf above the 5-year average (U.S. Working Natural Gas in Storage).

Consumption. A return to normal temperatures in 2007 is expected to drive strong year-over-year growth in residential consumption of natural gas. A first quarter comparison of EIA’s estimated residential consumption shows a 14-percent increase from 2006 to 2007. Taking the year as a whole, residential consumption is expected to increase 10.8 percent in 2007. Similarly, commercial and industrial sector consumption are expected to increase by 6.3 and 1.9 percent, respectively, in 2007 because of a return to normal weather, lower commercial prices, and growing industrial output. All three sectors are expected to show small changes in 2008: residential consumption staying essentially flat and commercial and industrial consumption increasing by 0.6 and 1.5 percent, respectively. Total natural gas consumption growth for 2007 and 2008 is projected to increase by 2.9 and 1.8 percent, respectively, after falling by 1.7 percent in 2006 (Total U.S. Natural Gas Consumption Growth).