High gas inventories prompt US EIA to cut price projections

Washington (Platts)--7Dec2004

Pointing to "continued high natural gas inventories," the US Energy
Information Administration on Tuesday pulled back sharply on its earlier
estimates for winter gas prices. In its December short-term energy outlook,
the agency cut 58 cts and 65 cts from its month-ago projections for
fourth-quarter 2004 and first-quarter 2005 Henry Hub spot prices, setting the
new marks at $6.39/Mcf and $6.14/Mcf, respectively. The new report also cuts
15 cts from the 2004 Henry Hub estimate, bringing it to $6.03/Mcf, and 32 cts
from the 2005 target, which now stands at $6.01/Mcf. Similar reductions were
made to the agency's quarterly and annual average wellhead price estimates.
EIA noted that the average Henry Hub price was $5.15/Mcf in September and
$6.54/Mcf in October, but as "Gulf of Mexico production recovered from the
impact of Hurricane Ivan and mild November weather restrained heating demand,"
spot prices fell under $5.00/Mcf in late November. "Still, with the peak
winter weather closing in, natural gas prices are poised to rise over the next
several months," the report said. But it emphasized the new projections were
reduced from the November report due to strong storage numbers. Working gas in
storage is estimated to have reached 3.28 Tcf at the end of November, an 8%
hike over a year ago and 11% higher than the five-year average. On the demand
side of the equation, EIA slightly reduced its earlier estimate for 2004 to
21.94 Tcf; it slightly hiked its 2005 projection to 22.74 Tcf.

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