WASHINGTON — Based on several weeks of strong inventory builds, the U.S. Energy Information Administration (EIA) has revised its projections for natural gas prices downward through 2011, according to its latest Short-Term Energy and Winter Fuels Outlook.
The Henry Hub spot price averaged $3.89 per million Btu (MMBtu) in September, $0.43 per MMBtu lower than the average spot price in August. Prices are expected to remain below $4 per MMBtu in October, but rise to $4.68 per MMBtu by January as heating demand increases.
Expectations are now for a price of $4.16 per MMBtu for the last quarter of 2010, $0.27 per MMBtu (6%) lower than last month’s outlook. Price expectations for 2011 are $4.58 per MMBtu, which is $0.18 per MMBtu (4%) lower than last month’s forecast, primarily due to a stronger domestic production forecast.
For propane users, EIA expects residential users to spend about 8% more this year, but that increase varies across regions. Residential propane prices (as of Oct. 11) are $2.395 per gallon (up $0.319 from a year ago) and wholesale prices are $1.327 per gallon (up $0.327 from a year ago).
The weather plays a key role in these projections. According to the National Oceanic and Atmospheric Administration’s (NOAA) most recent projection of heating degree-days, the lower-48 states are forecast to be 3% warmer during the October through March winter heating season compared with last winter and 1% warmer than the 30-year average (1971-2000). However, heating degree-day projections vary widely between regions. For example, the Northeast, the principal market for heating oil, is projected to be about 5% colder than last winter, while the South is projected to be about 15% warmer.
EIA projects average household expenditures for space-heating fuels to increase 2.5% this winter from last winter.