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Gas price outlook bullish despite outlook for production to outpace demand

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Gas price outlook bullish despite outlook for production to outpace demand

The federal government is bullish on the U.S. natural gas market even as it anticipates domestic natural gas production growth will outpace that of domestic demand.

In its latest "Short-Term Energy Outlook," released Feb. 6 the U.S. Energy Information Administration projects spot prices at Henry Hub will climb 7.0% in 2018 to average $3.20/MMBtu before declining 3.7% in 2019 to $3.08/MMBtu.

In the prior outlook, the EIA had projected spot prices would average $2.88/MMBtu and $2.92/MMbtu, respectively, in 2018 and 2019.

The EIA predicts dry natural gas production will climb 9.1% to average 80.30 Bcf/d in 2018, up from the prior outlook of 80.42 Bcf/d, as retail sales volumes climb 4.2% in 2018 to 77.44 Bcf/d, down from the prior outlook of 77.53 Bcf/d. The agency anticipates gross exports will climb 19.7% to average 10.40 Bcf/d, up from the prior forecast of 10.23 Bcf/d.

Gross pipeline imports are expected to slide from 8.1 Bcf/d the year prior to 7.9 Bcf/d, up from the prior outlook of 7.7 Bcf/d.

During the year, the EIA forecasts residential demand will average 12.88 Bcf/d, up from the prior forecast of 12.85 Bcf/d, while commercial sector demand averages 9.09 Bcf/d, up from the prior forecast of 9.04 Bcf/d, and industrial demand averages 21.75 Bcf/d, up from the prior forecast of 21.69 Bcf/d.

At the same time, the EIA trimmed its 2018 power-sector demand forecast, from 27.01 Bcf/d to 26.79 Bcf/d.

In 2019, the EIA forecasts dry gas production will climb 3.2% to reach 82.86 Bcf/d, down from the prior outlook of 83.02 Bcf/d, as retail sales volumes climb 2.3% to 79.20 Bcf/d, down from the prior outlook of 79.72 Bcf/d. The agency predicts gross exports will climb 23.9% to 12.89 Bcf/d, down from the prior forecast of 12.84 Bcf/d.

Meanwhile the EIA predicts gross pipeline imports will climb 3.8% to 8.2 Bcf/d in 2019, up from the prior outlook of 8.0 Bcf/d.

On the demand side, the government agency predicts residential sales will average 12.67 Bcf/d in 2019, down from the prior forecast of 12.80 Bcf/d, while commercial sales average 9.04 Bcf/d, against the prior outlook's projection of 9.00 Bcf/d, and industrial sales average 22.25 Bcf/d.

The EIA trimmed its 2019 power-sector demand outlook from 28.34 Bcf/d to 27.91 Bcf/d.