Natural gas spot prices at Henry Hub will average $2.65/MMBtu in the second quarter before climbing above the $3 mark in 3Q2023 amid increased consumption and flat domestic production, according to updated projections from the Energy Information Administration (EIA).
Henry Hub prices also averaged $2.65 in the first quarter as “spring-like” temperatures tamped down demand in early 2023, the agency noted in its latest Short-Term Energy Outlook (STEO) released April 11.
However, prices are poised to rise later this year as summer cooling demand kicks in and as production volumes remain “relatively flat,” according to the latest STEO.
“We expect relatively flat U.S. natural gas production, rising demand for feed gas from Freeport LNG as the export terminal returns to full operations, and increased natural gas consumption in the electric power sector to raise natural gas prices through the summer,” researchers said. “We forecast the Henry Hub price to average slightly more than $3.00/MMBtu in 3Q2023.”
U.S. dry natural gas production averaged 101.6 Bcf/d during the first quarter of 2023, a 1.4% increase over 4Q2022 output, with mild winter weather limiting disruptions from freeze-offs, EIA said.
The latest STEO modeled average domestic production of 100.9 Bcf/d for full-year 2023, a 3% increase over 2022 output.
“If production were to increase by more than our forecast, it could put downward pressure on natural gas prices,” researchers said. “Alternatively, if declines are more than in our forecast, it would likely lead to higher prices, other factors equal.”
Natural gas exited the injection season at an estimated 1,856 Bcf, or a 19% surplus to the five-year average, according to EIA.
The latest STEO modeled a total inventory increase of 1,985 Bcf for April through October, in line with the five-year average for injections for the period. This would leave end-October inventories at 3,842 Bcf, or 6% above the five-year average.
“Ultimately, natural gas inventories at the end of October will depend on temperatures throughout the summer,” which will also influence the trajectory of natural gas prices, researchers said.
