By Charles Kennedy of Oilprice.com,
Continued increases in U.S. dry natural gas production are expected to outpace domestic demand and exports this year and next, sending the average U.S. benchmark price lower than in 2022, the U.S. Energy Information Administration (EIA) said on Wednesday.
The EIA expects the U.S. benchmark Henry Hub price to average $4.90 per million British thermal units (MMBtu) this year, according to its January Short-Term Energy Outlook (STEO). The projected average would be more than $1.50/MMBtu lower compared to the 2022 average of natural gas prices.
In 2024, Henry Hub prices are expected to remain almost the same compared to 2023 levels, as U.S. production is set to continue growing, the EIA said.
This year, prices are likely to average close to $5.00/MMBtu in the first quarter, due to higher demand in the winter and LNG exports at near-capacity volumes. The return of Freeport LNG after a fire in June 2022 will also drive higher natural gas demand in the first quarter, the EIA said.
As the winter ends in the second quarter of 2023, and as LNG exports will stay flat once Freeport LNG comes back online, natural gas prices are expected to drop in Q2, also because U.S. production will continue to rise, according to EIA’s estimates.
U.S. natural gas prices are back to reflecting the domestic supply and demand balances, shaking off – for now – the geopolitical premium that ruled the energy and natural gas markets throughout most of 2022 after the Russian invasion of Ukraine in February.
Early on Wednesday, the U.S. benchmark price was tumbling by 4.10% to $3.433/MMBtu, as demand is light in the U.S. right now.
For the week January 18 to January 24, overall U.S. natural gas demand is expected to be very light through Friday, and then light from Saturday to Tuesday, according to NatGasWeather.com.