On an annualized basis, total natural gas consumption is expected to rise 4% in 2007 according to the Energy Information Administration (EIA). However, onshore gas production will rise by only 1.6% in 2007, the EIA adds.

In annual terms, electric-power projects increased consumption of gas in that sector this year 4.8% over 2006. Residential and commercial consumers are expected to use 10.5% and 7.5% more, respectively, in normal winter weather, while industrial consumption is expected to decline 1.5%.

Total gas consumption is expected to rise by 1.3% in 2008, much less than this year.

As for natural gas output, onshore growth continues to offset declines from the Gulf of Mexico. Through the first half of 2007, year-over-year Gulf production in federal waters has declined about 2.3%, while Lower 48 onshore output has grown 3.1%.

EIA projects a total hurricane-induced outage of 81 billion cubic feet (Bcf) from the Gulf-down from an 85-Bcf loss that was projected earlier this year. Total dry-gas production is expected to rise 0.8% in 2007 and 1.5% in 2008.

Imports of liquefied natural gas (LNG) for the first half of 2007 totaled 460 Bcf, about 53% more than in first-half 2006. For the remainder of the year, the EIA is forecasting a decline in LNG imports as more cargos are expected to be sold to European and Asian markets.

In Europe, recent market prices have risen from earlier this year and are more competitive with U.S. market prices. Total LNG imports in 2007 are expected to reach 850 Bcf, a record high.

In late July, working gas in storage was 2,840 Bcf. Strong injections in July pushed current stocks over year-ago levels for the first time since the EIA's storage report in late January. The mid-summer inventory was 410 Bcf higher than the five-year average, and 68 Bcf above the mid-summer 2006 level.

Henry Hub spot prices at mid-summer reflected an inactive 2007 hurricane season, high gas-storage levels, and mild summer weather in some parts of the U.S. representing about one-third of electric-power demand for natural gas.

As a result, the average monthly spot price declined for three consecutive months: May, June and July. However, the hurricane season runs through November 30, and price projections remain vulnerable to potential storm-induced gas supply disruptions.

Taking into account the EIA's mid-summer assumption about hurricanes, the Henry Hub spot price is expected to average $6.66 per thousand cubic feet in the third quarter and $7.96 in the fourth quarter. For the year, the Henry Hub price is expected to average about $7.45. For 2008, the price is forecast to average $8.06.

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