The US Energy Information Administration slashed its gas price estimates for 2012, lowering its Henry Hub outlook for the first quarter of 2012 by 25 cents to $3.29/MMBtu and cutting its 2012 estimate by 17 cents to $3.53/MMBtu.
"The current forecast for 2012 natural gas prices is significantly lower than at this time last year, as continued growth in production and a very warm start to the winter have contributed to record-high natural gas inventories," EIA said in its Short-Term Energy Outlook on Tuesday.
The new numbers are a stark contrast to the administration's predictions at this time last year, when EIA had projected prices would rise to $4.50/MMBtu in 2012. Gas prices averaged $4/MMBtu in 2011, just shy of EIA's year ago projection of $4.02/MMBtu for the year. The administration also unveiled its first projection for 2013, which pegged average Henry Hub prices at $4.14/MMBtu.
On the supply side, EIA cut its 2012 production outlook by 380,000 Mcf/d to 67.34 Bcf/d. "In the face of continued low spot and future prices as well as record high storage levels for this time of year, drillers appear to have begun cutting back on new production plans for 2012."
The outlook set the first 2013 production projection at 68.04 Bcf/d.
