NOAA Predicts Late Summer Hurricane-Induced Natural Gas Production Outages of 86 Bcf

This week’s commentary from MXenergy provides an update on natural gas supply and demand. Three weeks into the 2007 hurricane season has produced Subtropical Storm Andrea and Tropical Storm Barry. Chantal will be the next Atlantic storm name. In the record year 2005, Hurricane Cindy, the third storm of that season, hit July 3rd through the 7th.

This week wide-ranging temperatures across the country caused prices to fluctuate as needs for air conditioning arose and receded. Overall mild weather and adequate storage continue to place downward pressure on prices. Inventories could enter the winter at a record high of 3.5 Tcf or greater in the absence of a warmer-than-normal summer and hurricane-related supply disruptions. The National Oceanic and Atmospheric Administration (NOAA) has forecast an active hurricane season again this year with 13 to 17 named storms forming in the Atlantic Basin, including 7 to 10 hurricanes. The outlook includes hurricane induced production outages of 13 million barrels of crude oil and 86 Bcf of natural gas, primarily occurring in August and September.

An update on supply and demand:
Natural gas consumption for the first quarter of 2007 is 10% higher as compared to the same period last year. Demand this summer is projected to be similar to last year, which was much warmer than normal, leading to an annual average increase in consumption of 4%. Growth in consumption is expected to slow to less than 1% in 2008, but if anomalous temperatures spikes occur, gas-fired electric power generators will keep demand up in order to meet peak cooling demand. Natural gas production from the Gulf of Mexico is expected to decline over 7% this year. Onshore production increases are expected to offset the drop in the Gulf, leaving total production flat for this year. Imports of liquefied natural gas (LNG) are expected to reach 35% increase over last year, but pipeline imports on the other hand are projected to decline by 4% as rig activity and production in Canada (primary supplier of natural gas imports into the U.S.) continue to dip.