Natural gas prices forecast to stay low
By David Hannon -- Purchasing, 3/12/2009 2:00:00 AM
The U.S. energy Department is forecasting that natural gas prices in the U.S. will remain low this year as inventories continue to build during the recession.
According to figures released February 10, the Henry Hub spot natural gas price averaged $5.40/1,000 cubic feet (Mcf) in January, 60¢/Mcf below the average December spot price and well off the 2008 Henry Hub spot price average of $9.13.
The U.S. Energy Department forecasts that the Henry Hub spot natural gas price is expected to average $5.01/Mcf in 2009 before trending up to $5.93 in 2010 as the economy expands.
"Despite colder-than-normal weather [in January], prices continued downward in response to the ongoing drop in natural gas demand," the Energy Information Administration says in its latest forecast. "Natural gas prices in 2009 are expected to be largely driven by the extent of the supply response to the persistence of sluggish consumption in light of the current economic downturn. Prices are expected to remain weak as inventories build toward capacity this fall."
In a recent report, JPMorgan Chase analyst Scott Speaker lowered his 2009 forecast for natural gas prices to $5.69/million Btu, down from $6 predicted on Dec. 17.
"It has become clearer in the past month that severe manufacturing weakness will have an impact on natural-gas demand that goes beyond a brief hiccup or temporary condition simply needing some producer-driven tightening," Speaker recently told Bloomberg.
The forecasted decline in natural gas prices is good news for chemicals makers such as Westlake Chemical, which reported a $109 million loss in the fourth quarter, due in part to higher feedstock and energy costs and declining plastics demand and prices.
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