Henry Hub natural gas spot prices are set to remain subdued at around $2.40/MMBtu in February and March amid unusually mild weather, the U.S. Energy Information Administration (EIA) said in an updated forecast Tuesday.
In its latest Short-Term Energy Outlook (STEO), EIA said it expects Henry Hub spot prices to average $2.650 for full-year 2024, up from $2.540 in 2023. Prices then would approach $3.000 on average in 2025, according to the STEO.
The updated STEO prices for this year and next are flat versus the month-earlier forecast.
Market sentiment surrounding Henry Hub pricing for the remainder of 2024 and into 2025 has drifted in a bearish direction over the past month, with selling pressure weighted toward the front of the curve, NGI’s Forward Look data show.
For example, June 2024 Henry Hub fixed prices were recently trading at $2.322, down 10% compared to early January levels.
However, all 2025 contracts were recently trading north of $3.000 at the national benchmark, including prices above $4.000 for December 2025 delivery, suggesting some bullishness in the market versus EIA’s forecast, Forward Look data show.
In the updated STEO, EIA said it has cut its 2024 production forecast by 1 Bcf/d to 104 Bcf/d on average. Production then would climb to more than 106 Bcf/d on average in 2025, according to the STEO.
Meanwhile, demand reached a new high watermark in January, when domestic consumption set a monthly record at 118 Bcf/d. This included 46 Bcf/d consumed by the residential/commercial sector amid widespread Arctic cold last month, representing 4 Bcf/d growth year/year, according to EIA.
This coincided with a new January record for power sector demand at close to 37 Bcf/d, up 5 Bcf/d year/year, EIA said.
“Despite the cold snap that briefly increased natural gas prices, the Henry Hub spot price stayed below $3/MMBtu for most of January, which increased use of natural gas for electricity generation,” researchers said.
Daily average Henry Hub spot prices peaked at $13.080 on Jan. 12 before quickly subsiding as cold weather faded, NGI’s Daily GPI historical data show.
Early 2024 production pulled back from a monthly record of 106 Bcf/d in December, dropping to 102 Bcf/d in January, according to EIA. This, coupled with the strong demand, drove a net withdrawal for January of nearly 920 Bcf, among the largest ever, the agency said.
This dented, but did not erase, a 13% buffer versus the five-year average for Lower 48 storage at the start of the year.
“We expect U.S. natural gas inventories in February and March will fall by less than the five-year average because of milder-than-normal weather,” EIA said. “We forecast inventories will end this winter heating season…at about 1,910 Bcf, which would be 15% more than the five-year average.”
The latest STEO modeled 4% fewer heating degree days versus the prior 10-year average for February and March, though researchers cautioned that winter storms could significantly alter the consumption outlook.
An extended partial outage at the Freeport LNG terminal also is likely to reduce natural gas used for exports in February compared to January levels, EIA said.
