EIA's January Short-Term Energy Outlook (STEO), released on January 7, now includes EIA's forecast of energy consumption, supply, and prices through 2014. STEO expects continued growth in natural gas production, driven largely by onshore production in shale areas. In particular, production in the Marcellus Shale areas of Pennsylvania and West Virginia is expected to continue rising, as recently drilled wells become operational. Despite relatively low natural gas prices, Pennsylvania drilling continues at a strong pace as producers target combination oil-and-gas wells.
Production has been rising despite large decreases in the natural gas rig count over the past year. According to Baker Hughes, the natural gas rig count was 431 as of December 28, 2012, compared with 811 at the start of 2012. The oil rig count has also declined in recent months (oil rigs often produce associated natural gas), although declines have been much smaller than declines in the natural gas rig count. The declines in rig counts, coupled with continued production growth, suggest increases in rig efficiency, which will maintain production levels going forward.
This month's STEO expects that total marketed production will increase from 69.2 Bcf/d in 2012 to 69.8 Bcf/d in 2013, and drop slightly to 69.5 Bcf/d in 2014. EIA expects growth in Lower 48 onshore production will continue through 2014, and will be offset by Gulf of Mexico declines next year.
Natural gas prices fell over the last week, continuing an overall downward trend from the past few weeks. The Henry Hub spot price fell 16 cents per MMBtu from $3.30 per MMBtu last week to $3.14 per MMBtu yesterday. Prices declined similarly in most other areas of the country, and most prices are in the $3 per MMBtu range.
The Northeast posted the largest declines in prices this week. A cold snap that occurred at the end of December and lasted into the beginning of January sent prices in New York and New England above $15 per MMBtu. On December 31, prices at Transcontinental Pipeline's Zone 6 trading point for delivery into New York City averaged $16.74 per MMBtu; at the Algonquin Citygate, which serves Boston, prices averaged $15.27 per MMBtu. By January 2 (the beginning of this report week) prices at both these locations fell back to around $10 per MMBtu. At the end of the report week, the Transco Zone 6 New York price fell to $3.33 per MMBtu and the Algonquin Citygate price fell to $4.41 per MMBtu. Pricing points in the Northeast often spike during periods of high demand in the winter as a result of pipeline constraints.