EIA Lowers Henry Hub Price Forecast - Rigzone News

EIA Lowers Henry Hub Price Forecast | Rigzone

EIA Lowers Henry Hub Price Forecast

The U.S. Energy Information Administration (EIA) lowered its Henry Hub natural gas price forecast for 2023 and 2024 in its latest short term energy outlook (STEO).

According to the December STEO, the EIA now sees the natural gas Henry Hub spot price averaging $2.56 per million British thermal units (MMBtu) in 2023 and $2.79 per MMBtu in 2024. This STEO projects that the commodity will average $2.81 per MMBtu in the fourth quarter of 2023, $2.80 per MMBtu in the first quarter of next year, $2.36 per MMBtu in the second quarter, $2.80 per MMBtu in the third quarter, and $3.20 per MMBtu in the fourth quarter.

In its previous November STEO, the EIA forecast that the natural gas Henry Hub spot price would average $2.67 per MMBtu this year and $3.25 per MMBtu in 2024. That STEO saw the commodity coming in at $3.26 per MMBtu in the fourth quarter of 2023, $3.42 per MMBtu in the first quarter of 2024, $2.94 per MMBtu in the second quarter, $3.24 per MMBtu in the third quarter, and $3.42 per MMBtu in the fourth quarter.

Both STEOs show that the natural gas Henry Hub spot price averaged $6.42 per MMBtu in 2022.

“We forecast the U.S. benchmark Henry Hub spot price to average about $2.80 per MMBtu for the rest of the winter heating season, which ends in March,” the EIA noted in its December STEO.

“We lowered our forecast for natural gas prices this winter by more than 60 cents compared with our November STEO forecast. The lower price forecast is due to recent increases in natural gas production, which reduced natural gas prices in November, and high natural gas storage inventory levels,” it added.

The EIA highlighted in the December STEO that the Henry Hub spot price averaged $2.71 per MMBtu in November, which it pointed out was down 27 cents from October.

“Increased U.S. natural gas production in October and November 2023 contributed to the natural gas price decline in November,” the EIA said in the STEO.

“U.S. dry natural gas production averaged about 105 billion cubic feet per day (Bcfpd) in November, the most for any month on record,” it added.

“U.S. dry natural gas production averaged almost 103 Bcfpd in 1H23 and has increased in most months during 2H23. We forecast dry natural gas production to remain close to 105 Bcfpd for the rest of winter,” it continued.

The EIA also noted in the STEO that increased natural gas production throughout all of 2023 contributed to more natural gas in U.S. storage to start the winter heating season.

“High inventories at the end of November reduced our forecast natural gas prices for this winter heating season compared with our November STEO,” the EIA said in the December STEO.

“Storage inventories started the winter heating season at more than 3,800 billion cubic feet (Bcf), five percent more than the five-year (2018–2022) average,” it added.

“Mild winter weather in the United States in November reduced natural gas consumption. Less natural gas consumption along with increased natural gas production help increase storage inventories to 3,771 Bcf at the end of November, seven percent more than the five-year average,” it continued.

“We forecast natural gas storage inventories to remain above the five-year average throughout winter and for all of 2024,” the EIA went on to state.

In its December STEO, the EIA forecast that U.S. natural gas consumption in the residential and commercial sectors will average “almost 40 Bcfpd for the rest of the winter heating season, two percent less than the five-year average”.

“Our forecast of close to average residential and commercial sector consumption is based mostly on our winter weather forecast. For the rest of the winter heating season, we forecast close to normal weather with 44 fewer heating degree days (HHDs) than the five-year average,” the EIA added.

“If temperatures are colder than forecast, the residential and commercial sectors will likely consume more natural gas than our forecast. Extreme winter weather events or prolonged cold temperatures have the potential to cause more significant disruptions to markets,” the EIA stated.

In a report sent to Rigzone earlier this month, Macquarie strategists said they had lowered their U.S. natural gas price outlook for 2024 “due to a combination of big supply growth, no bullish surprises to LNG start-up schedules, and the assumption of normal to milder than normal temperatures this winter”.

That report showed that Macquarie expected the natural gas price to average $2.68 per MMBtu in both 2023 and 2024. According to that report, Macquarie anticipated that the natural gas price would average $2.90 per MMBtu in the fourth quarter, $2.70 per MMBtu in the first quarter of 2024, $2.40 per MMBtu in the second quarter, $2.90 per MMBtu in the third quarter, and $2.70 per MMBtu in the fourth quarter.

In a separate report sent to Rigzone in December, BMI projected that the Henry Hub price would average $2.67 per MMBtu in 2023 and $3.40 per MMBtu in 2024.

Another report sent to Rigzone this month revealed that Standard Chartered saw the NYMEX basis Henry Hub price averaging $4.75 per MMBtu next year.

To contact the author, email andreas.exarheas@rigzone.com

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