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Energy Prices Remain High

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Natural gas prices.
(Photo: ©iStockphoto.com/PaulFleet)

WASHINGTON — The Henry Hub spot price averaged $4.31 per MMBtu in May, six cents higher than the April average and 11 cents higher than forecast in the agency’s previous report. This increase is reported amid growing consumption, even though inventories remain robust and the production forecast was “revised upward significantly.”

U.S. Energy Information Administration (EIA) expects total natural gas consumption will grow by 1.4% to 67.1 billion cubic feet per day (Bcf/d) in 2011. Forecast industrial and electric power consumption are expected to rise 3.1% to 18.7 Bcf/d in 2011 and 0.4% to 20.3 Bcf/d, respectively, the report says.

Projected total consumption rises slightly in 2012 to 67.2 Bcf/d, according to the EIA. Growth continues in the industrial sector at 1.6%, as the natural-gas-weighted industrial production index rises 2.7%. Consumption also increases in the electric power sector (2.1%). Residential and commercial consumption, however, decline by 2.8% and 2.2%, respectively, stemming from the forecast decline in heating demand for natural gas, the report says.

Working natural gas in storage was 2,107 Bcf at the end of May, 237 Bcf below last year’s level at this time. Inventories, though lower than last year, are expected to remain robust due to higher production throughout the 2011 injection season, the agency says.

The 2011 production forecast has been revised upward significantly due in part to unexpectedly strong March production reported in EIA’s latest report. The agency now expects total U.S. marketed natural gas production to increase by 4.5%, up from the 2.3% predicted in last month’s report.

EIA expects that the Henry Hub price will average $4.25 per MMBtu in 2011, a decline of 13 cents from the 2010 average. The agency says that the slowing growth in production will contribute to a tightening domestic market next year with the Henry Hub price averaging $4.58 per MMBtu in 2012.

Meanwhile, route drivers can expect gas prices to remain high. It’s the same old story: crude oil supplies are expected to tighten amid growing demand in the emerging economies and slowing growth in non-OPEC supply. The EIA reports that crude oil spot prices averaged $103 per barrel in March, $110 per barrel in April, and $101 per barrel in May. The agency predicts per-barrel prices in 2011 to average $102, compared to 2010’s $79 per barrel.

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