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The U.S. Energy Information Administration on Tuesday expects natural gas prices to remain below $4 a thousand cubic feet until late this year amid robust supplies and weaker demand resulting from the economic downturn.

Industrial gas consumption is forecast to decline by 8% this year, unchanged from last month's forecasted decrease, according to the EIA's Short-Term Energy Outlook.

Major industrial gas consumers, including companies in the fertilizer, chemicals and aluminum industries, have curbed gas use and cut spending.

Total natural gas consumption is expected to fall 2.2% in 2009 amid the ongoing economic downturn and increase slightly in 2010, said the EIA, the statistical arm of the U.S. Energy Department. The EIA had previously forecast a 1.9% drop in 2009.

U.S. marketed natural gas production is expected to fall 1.1% in 2009 and slip 2.6% in 2010 following a widespread pullback in drilling activity. Producers such as Chesapeake Energy Corp. (CHK), Devon Energy Corp. (HK) and SandRidge Energy (SD) have scaled back spending amid falling commodity prices. The companies idled rigs and trimmed production forecasts to cope with lower gas prices and stem the flow of gas into the marketplace.

The EIA projects that total U.S. marketed production will decline by nearly 5 billion cubic feet between the first and fourth quarters of 2009, according to the outlook.

The number of rigs drilling for natural gas in the U.S. has fallen by more than half since September, when the gas rig count peaked at 1,606, according to oil-field services company Baker Hughes (BHI).

"The lagged effect of this year's drilling pullback is also expected to result in lower natural gas production in 2010. However, EIA does not anticipate that working rigs and natural gas prices need to return to 2008 levels for production to increase," the EIA said, citing drilling advancements that have boosted well output while reducing well costs.

Liquefied natural gas imports to the U.S. are expected to rise to 495 billion cubic feet in 2009, up from the 352 billion cubic feet received last year, as new global LNG production capacity comes on line worldwide.

Natural gas prices at the benchmark Henry Hub are expected to average $4.13 a thousand cubic feet in 2009 and 5.49 a thousand cubic feet in 2010, slightly higher than the previous forecast and down from an average $9.13 a thousand cubic feet in 2008, the EIA said.

Gas for June delivery on the New York Mercantile Exchange was recently trading less than a penny lower at $3.728 a million British thermal units.

Natural gas in U.S. storage stands at 2.337 trillion cubic feet - about 31% higher than last year and 22% above the five-year average. Storage levels are expected to reach record levels by the end of injection season in October, when natural gas supplies are replenished to meet winter heating demand.

The EIA also expects production shut-ins of about 36 billion cubic feet to result from the 2009 hurricane season. The Gulf of Mexico produces about 6.5 billion cubic feet of natural gas a day.

-By Jason Womack, Dow Jones Newswires; 713-547-9201; jason.womack@dowjones.com