EIA Outlook
U.S. Natural Gas Markets.
The natural gas spot price at the Henry Hub has remained well above $5 per million btu on a monthly basis since the beginning of the year and is above $6 in the first week of June. The low level of underground storage is the principal reason for these unseasonably high prices. Natural gas prices will likely remain high as long as above-normal storage injection demand competes with industrial and power sector demand for natural gas. Above average prices and strong gas-directed drilling efforts this year will be needed to ensure that gas in storage reaches at least minimally adequate levels by the beginning of the next heating season. If adverse weather intervenes, the task could be made more difficult and even place additional upward pressure on prices. Moreover, if the summer is unusually hot, particularly in the Western and South Central regions, where natural gas is heavily used for the power generation needed to meet cooling demand, marginal gas prices may experience additional pressure. Indeed, occasional sharp price increases could occur as the difficulty of building adequate storage increases. Assuming normal weather, spot prices in the $5.50-$6.00 per million btu range are expected for the rest of 2003