POLL-U.S. natgas 2014 price forecasts raised after bitter cold winter
NEW YORK, Feb 14 (Reuters) - U.S. natural gas prices will average the highest level in four years in 2014, buoyed by a freezing start to the year that has boosted demand and depleted stockpiles, according to a Reuters poll of analysts on Friday. Prices will rise even further in 2015 and 2016 as demand for electric generation rises with the shutdown of coal power plants and as exports to Mexico, Europe and Asia increase. Spot prices this year at Henry Hub, the benchmark U.S. supply point in Louisiana, will average $4.37 per million British thermal units, 18 percent over the $3.70 average in 2013. The estimate is up 9 percent from the Reuters price poll estimate of $4.02 in November. It would be the highest average since 2010 when Henry Hub prices averaged $4.41. More than 2 trillion cubic feet of gas have already been drained from storage this winter, more than the whole of last winter. A major restock during the summer will help push prices higher and potentially encourage more drilling, analysts said.
So far this year, Henry Hub prices <GT-HH-IDX> on the IntercontinentalExchange have averaged $5.24, up 58 percent from the $3.32 average at the same time last year, according to Reuters data, mainly due to record demand for heating amid the coldest winter in decades. The poll price estimates for 2014 ranged from a low of $3.75 to a high of $6.00. Of the 23 participants, there were 11 upward revisions for 2014, two downward revisions and six unchanged. Four did not participate in the previous poll.
Natural gas production is expected to hit record levels for a fourth straight year in 2014, primarily due to booming output from shale plays like the Marcellus in Appalachia. Output is expected to average 71.8 billion cubic feet per day this year, topping last year's record of 70.2 bcf/d, according to federal data. Higher prices this year are expected to slow demand, analysts said, especially from the electric power sector as utilities search for cheaper ways to produce electricity, including coal. "At these natural gas prices coal is more attractive for power generation across much of the country," said Katherine Spector, commodities macro strategist at CIBC World Markets in New York. Utilities in the West, however, will likely still burn a lot of gas to produce power despite the higher prices as the severe drought in the region cuts hydropower output.
2015/2016 SEEN UP TOO Analysts forecast gas prices in 2015 and 2016 would climb to the highest level in six years as utilities shut more coal plants to comply with federal environmental rules and the United States starts exporting liquefied natural gas (LNG) to Europe and Asia. Prices are expected to average $4.55 per mmBtu in 2015 and $4.89 in 2016. That would be the highest price since 2008 when prices averaged $8.93 per mmBtu, the highest annual average since at least 1989 when Reuters started recording price data.
(Reporting by Scott DiSavino in New York and Eileen O'Grady in Houston; editing by Edward McAllister and Matthew Lewis)