Trade Group Sees Tight Natural Gas Supplies This Winter
Thursday October 2, 6:39 am ET
WASHINGTON (Dow Jones)--Natural gas users will face a second straight winter of tight supplies, the Natural Gas Supply Association said Thursday.
The association anticipates about the same degree of pressure this year on the key components of the natural gas supply-demand equation, which include the weather, production and the economy.
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"That means the scenario has changed very little from last winter, when we experienced a dramatic increase in both consumer demand and average wholesale costs, due to colder temperatures than the prior heating season," said association chairman William Transier.
Government and independent analysts predict that wholesale natural gas prices, now in the $4 to $5 per thousand cubic feet range, will move into the $4 to $6 range throughout the heating season, with higher short-term price spikes a possibility, he said. The association does not project actual cost figures.
Although more drilling rigs and well completions are coming on line, Transier said actual production is expected to remain almost flat compared with last year at about 50.6 billion cubic feet per day. "It's clear that we are working a lot harder just to maintain a steady supply," he added.
A colder-than-normal winter would likely result in greater price volatility and short-term price spikes. But the National Oceanic and Atmospheric Administration is forecasting a near-normal winter, based on a 30-year average, the association said.
Additional demand will be met by Canadian imports and imports of liquefied natural gas from overseas, the association added.
The association also noted that the economy appears to be revving up, which will most likely lead to some additional energy demands during the winter. Industrial production, an important factor for natural gas, is projected to grow at 1.4% from the same winter period last year, the association said, based on figures provided by economic forecasting firm Global Insight.
Still, the association said there are likely to be some offsetting reductions as "industrial customers conserve or switch processing fuels due to the tightness in the market."
Finally, the association outlined some risks that could send prices higher this winter. For example, an extended hurricane season could damage platforms and gathering stations in the Gulf of Mexico, and other major infrastructure disruptions like this summer's blackout could affect the fundamentals of natural gas supply and demand. |
