EIA RAISES GAS PRAISES
Natural gas will cost more this year, on average, than previously expected, government forecasters said Tuesday.
The U.S. Energy Information Administration said natural gas will average $4.74 per million British thermal units, up 6.8% from its forecast last month, as supplies are likely to stay tight.
The country's shale boom is encouraging power plants and industrial consumers to use more gas than expected, but the boom hasn't produced as much supply as expected this year, the EIA said. The agency's short-term forecast predicts the gas industry will need to produce more in November and December to catch up and match consumer demand of 72.3 billion cubic feet a day in 2014, up 0.22 billion cubic feet a day from last month's forecast.
Gas prices have been rising this spring as investors question whether even record production could match unrelenting demand. Forecasters now say average prices from April through June will be 10% higher than they expected just a month ago, pushing the average price up for the whole year.
It's part of the fallout from a frigid winter that pushed so much demand for home heating that stockpiles dropped to an 11-year low. Utilities that must restock for the winter are competing for supplies with power plants and industrial consumers that are using more gas than expected now. As temperatures heat up, power plants use gas to meet demand for electricity to run air conditioners.
The EIA expects prices to finish 2014 at an average of $4.88 per million British thermal units, up 27% from 2013's average price of $3.84. The EIA expects gas prices to drop back down to $4.23 in 2015 once stockpiles are refilled.
Inventories totaled 980 billion cubic feet as of April 25, half of what they usually are this time of year.
Producers have been so slow to replenish that stockpile that the EIA reduced its estimate for the second time this spring on how much gas will be on hand to start next winter. It expects 3.4 trillion cubic feet in storage by the end of October, the lowest level since 2005.
The gas industry produced 72 billion cubic feet a day in April, 0.4 billion cubic feet less than what the EIA expected. It increased its forecasts for production in November and December by about 0.5 billion cubic feet a day to cover slower-than-expected production and high demand so far this year.
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