EIA: natural gas to average $7.53 in ‘07

Henry Hub spot price expected to average $6.90 per mcf this year; WTI, $67 per barrel in ’06, $66 per barrel next year

Kristen Nelson

Petroleum News

The Henry Hub spot price for natural gas is expected to average $6.90 per thousand cubic feet this year and rise to $7.53 per mcf in 2007, the Department of Energy’s Energy Information Administration said Oct. 10 in its short-term forecast.

EIA said it projects actual Organization of Petroleum Exporting Countries production cuts will be less than stated because such cuts are prorated and some OPEC members are already below existing quotas due to production difficulties.

The agency is projecting an increase in world oil demand in 2007, which is expected to result in an increase in demand for OPEC oil, keeping 2007 OPEC crude oil production at current levels.

“Surplus world crude oil production capacity, all of which is located in Saudi Arabia, is expected to increase only slightly in 2007,” the agency said, keeping surplus world oil production capacity near 30-year lows.

The increasing demand will be partially met by new supplies from non-OPEC sources, with net annual non-OPEC oil production expected to grow by 700,000 barrels per day this year.

World petroleum consumption is expected to grow by 1.2 million bpd this year and by 1.5 million bpd in 2007. There is not expected to be any U.S. demand growth this year; demand growth in 2007 is expected to be 400,000 bpd, with the United States and China accounting for over half of worldwide demand growth next year.

Because of limited surplus production capacity and a continued tight supply-demand balance the agency said it “projects that world oil prices in 2007, on average, will be only slightly less than their average 2006 levels.”

EIA expected West Texas Intermediate crude oil to average almost $67 this year and almost $66 in 2007.

EIA said domestic dry natural gas production is expected to increase by 0.8 percent both this year and next “due in large part to restored production capacity” after hurricanes in the Gulf of Mexico in 2005.

Total net imports of natural gas, pipeline and liquefied natural gas, are expected to show a 4.5 percent decline this year due to a decrease in the amount of Canadian natural gas available for export to the United States.

Total LNG imports for 2006 are expected to be approximately 650 billion cubic feet compared to 630 bcf in 2005.

2007 LNG imports are projected to total 920 bcf, the EIA said. The 41 percent increase in LNG imports next year is largely due to rising incremental supplies from Africa-Algeria, Nigeria, Libya and Egypt, the agency said.

The Henry Hub natural gas price, which was close to $14 per mcf in October 2005, following the hurricanes, is expected to average about $6.90 per mcf this year and $7.53 per mcf in 2007.

Natural gas prices are expected to be “significantly lower” this winter than last, the agency said, due to production recovery after the hurricanes and “the very high levels of natural gas storage.”