The U.S. Energy Information Administration (EIA) is slashing its projected 2024 average Henry Hub natural gas spot price by 14% versus its month-earlier forecast after observing record lows for the benchmark in February, the agency said Tuesday.
EIA, in its latest Short-Term Energy Outlook (STEO), modeled an average Henry Hub price of $2.27/MMBtu for 2024, with prices expected to then climb to $2.94 on average for 2025.
Henry Hub averaged just $1.72 in February, a record low when adjusting for inflation, the agency said.
Unsurprisingly for those that closely follow natural gas markets, EIA found that heating degree days have thus far lagged historical norms this winter, totaling 8% below the 10-year average.
Residential/commercial demand this winter is poised to come in 3 Bcf/d below the prior five-year average, or minus-9%, according to the latest STEO.
“Reduced natural gas consumption for space heating demand and increased U.S. dry natural gas production, which we estimate will be about 3 Bcf/d more this winter compared with last winter, have contributed to above average inventories,” researchers said.
EIA in the updated STEO modeled an end-March storage carryout of 2,270 Bcf, or 37% higher than the 2019-2023 average. This should in turn keep pressure on prices, which are set to remain below $2.00 during the second quarter, according to the agency.
The March STEO forecast a 2Q2024 average Henry Hub price of $1.79, which is somewhat bearish versus the recent forward curve, according to NGI’s Forward Look. Henry Hub fixed prices for April, May and June were recently averaging $1.920, Forward Look data show.
As for production, after weather-related disruptions in January, output approached 104 Bcf/d in February, EIA said.
While researchers acknowledged recent moves by natural gas producers to curtail output, the latest STEO called for domestic production to “decline slightly” through the remainder of the year, ending at 103 Bcf/d in December 2024. Output would then climb to 104 Bcf/d on average in 2025, according to the STEO.
“We do not expect that natural gas production will return to its December 2023 record of 106 Bcf/d during the forecast period,” researchers said.
Increased production in 2025 would be driven by higher natural gas prices and increased demand for liquefied natural gas exports, according to the agency.
Researchers identified several risks to their latest forecast, pointing to domestic natural gas production as a key factor influencing the outlook on both prices and storage inventories.
“How soon curtailments affect the market is highly uncertain, and our price forecast is based on relatively high production entering the shoulder season,” researchers said. “...However, if there is less production than our forecast, the next few months are warmer than normal and natural gas consumption for electric power generation increases more than our forecast, then inventories could fall below our forecast and prices could be higher.”
