Vigorous natural gas production in the Marcellus and Utica shales and normal temperatures should result in a $4.50/MMBtu price at the benchmark Henry Hub in Louisiana this winter, ICF International Vice President Kevin Petak said Thursday.
"The growth in production over the past 12 months has been about 4 Bcf/d," Petak said during an ICF-sponsored webinar. "Three quarters of the growth has been concentrated in the Marcellus and Utica areas. They are juggernauts."
The amount of gas in storage at the beginning of the 2014 storage season was about 800 Bcf and that was "below historic averages," he said. "There was a good bit of catch-up, but injection levels have been robust, averaging 12.5 Bcf/d over the last seven months."
The US Energy Information Administration said earlier Thursday that working gas in storage rose 91 Bcf to 3.571 Tcf for the week that ended Friday. The 294-Bcf deficit to a year ago fell to 238 Bcf, while the 310-Bcf deficit to the five-year average of 3.832 Tcf dropped to 261 Bcf.
The reduced gas supply directly resulted from the unusually cold weather that pounded New England and the Mid-Atlantic states in January and February.
The amount of working gas at the end of current storage season will be at about 3.5 Tcf in the US, and that amount "is adequate" because of the continued growth in production, he said.
ICF anticipates the US will experience "normal, 20-year-average weather" this winter, which will result in reduced demand for gas relative to last winter. He also said the robust production of gas "is offsetting the need for gas in storage."
He said he expects the price of gas this winter will be about $4.50/MMBtu at the Henry Hub. He said the price reflects concerns about the deficit in the amount of working gas in storage.
"Our projections are fairly similar to the NYMEX strip, but there is a little bit more seasonal volatility in our projection than there is in the NYMEX strip," he noted.
He said he expects the price of gas will decline to $4.00/MMBtu "over the next couple of years with seasonal price volatility."
Predicting the near-term price of gas is made difficult by the weather, "which is the biggest wild card, the least predictable of the variables. Weather can move prices in either direction."
The improving North American economy points to higher gas prices, but he said gas demand will be down, "assuming normal weather" and that "points to lower prices going forward," he said.
