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EIA raises forecast for natural gas prices

From the May 10, 2013 issue of Public Power Daily

Originally published May 10, 2013

By Robert Varela
Editorial Director
The Henry Hub natural gas spot price, which averaged $2.75 per million British thermal units (MMBtu) in 2012, is expected to average $3.80 per MMBtu in 2013 and $4.00 per MMBtu in 2014, the U.S. Energy Information Administration said in its May 7 release of its "Short-Term Energy Outlook." Those projected prices are about 27 cents per MMBtu and 40 cents per MMBtu higher, respectively, than forecast in last month’s short-term energy outlook.

The Henry Hub spot price averaged $4.17 per MMBtu in April, the highest monthly average price since July 2011. EIA expects Henry Hub spot prices will fall through September as natural gas markets loosen with lower summer demand. Going into the summer, EIA said production is expected to be slightly higher than last year’s levels, while summer electric power demand is projected to be lower than last year’s record‐high levels.

Due in part to the rise in natural gas prices, the share of total generation fueled by coal is forecast to increase from 37.4 percent in 2012 to 40.1 percent in 2013, EIA said. "Conversely, the share of generation fueled by natural gas declines from 30.4 percent in 2012 to 27.8 percent in 2013." EIA forecasts average delivered coal prices of $2.40 per MMBtu in 2013 and $2.44 per MMBtu in 2014.

With warmer weather now forecast for this summer, projected residential and commercial electricity sales for 2013 and 2014 are about 0.5 percent higher than in last month’s short-term energy outlook. These lower temperatures relative to last year contribute to a projected 3.6‐percent decline in U.S. residential electricity sales during the summer peak cooling months, EIA said. For the entire year, U.S. residential retail electricity sales increase by 1.1 percent during 2013 and by 0.5 percent in 2014. Total U.S. electricity generation will grow by 1.4 percent in 2013 and by 1.0 percent in 2014, the agency said.

After an increase of 1.4 percent during 2012, EIA expects U.S. retail residential electricity prices will grow by 2.6 percent in 2013 and by 2.3 percent in 2014.

Carbon dioxide emissions from fossil fuels fell 4 percent in 2012 but should rise by 2.6 percent in 2013 and then by 0.6 percent in 2014, EIA said. "The increase in emissions over the forecast period primarily reflects the projected increase in coal use for electricity generation, especially in 2013 as it rebounds from the 2012 decline," the agency said.


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