WASHINGTON — The Energy Information Administration (EIA) projects the monthly "Henry Hub" natural-gas spot price to average $2.32 per thousand cubic feet (Mcf) in October, the lowest monthly average spot price since September 2001, according to the most recent Short-Term Energy Outlook.
The Henry Hub spot price averaged $3.23 per Mcf in August, $0.25 per Mcf below the average spot price in July. Prices continue to be pushed lower as production adds to already high inventories, EIA reports. Natural gas inventories will likely set a new record high at the end of this year’s injection season (October 31), reaching more than 3.8 trillion cubic feet (Tcf).
As electric power demand for air conditioning wanes, a continuation of recent natural gas supply trends could cause spot natural gas prices to fall below current projections before cooler temperatures induce higher demand for space heating, the report says.
In projections, prices rise modestly in 2010, reflecting increased economic activity and lower production levels; however, it will take some time to work off current inventory, and enhanced production capabilities should limit significant increases in prices throughout the forecast period, EIA says.
The projected Henry Hub annual average spot price increases from $3.65 per Mcf in 2009 to $4.78 in 2010. However, upward price pressure next year will be limited by electric-power producer's sensitivity to high gas prices and continued expansion of U.S. natural gas production from shale formations, EIA says.
EIA also expects retail prices for electricity to show year-over-year declines next year for the first time since early 2003 due to lower fossil fuel costs. The projected annual average 2010 residential electricity price of 11.4 cents per kilowatt hour is about 2% lower than the 2009 average.