The U.S. Energy Information Administration (EIA) is cutting its projected average Henry Hub natural gas spot price to $2.20/MMBtu for 2024, down 5.2% from the $2.30 average price the agency modeled a month earlier.
In the April release of its Short-Term Energy Outlook (STEO), published Tuesday, EIA said it expects spot prices at the national benchmark to average less than $2 during the second quarter. The anticipated price weakness reflects high storage inventories exiting the 2023-24 winter, according to EIA.
After starting off the year at $2.560, NGI’s Henry Hub next-day natural gas cash price dropped to $1.435 by March 31, the end of the traditional storage withdrawal season. Prices have since recovered some ground, but remain sharply below year-ago levels around $2, according to NGI’s Daily Historical Data.
The United States ended the withdrawal season with an estimated 39% storage surplus versus the five-year average, EIA said.
The agency said it expects the injection rate from April to October to lag historical norms. Even so, agency projections would still put inventories on pace to reach record highs before the start of withdrawals later this year.
“From April through October this year, we forecast less natural gas will be injected into storage than is typical, largely because we expect the United States will produce less natural gas on average” for the second and third quarters of 2024 versus the first quarter, researchers said.
“Despite lower production, we still expect the United States will end the injection season with 4,120 Bcf of natural gas in storage, 10% more than the five-year average and the most on record,” they added.
That said, the EIA modeling comes with a few caveats, as trends in production and power burns this summer could reshape the storage trajectory.
For the latest STEO, the agency modeled domestic dry gas production of 103 Bcf/d for April through October, versus 104 Bcf/d in the year-earlier period. That would appear to be on the high side of recent proprietary estimates. Wood Mackenzie data as of Tuesday showed production averaging around 100 Bcf/d over the past 30 days.
On the demand side, the latest STEO modeled 38 Bcf/d of U.S. natural gas consumption for electricity generation on average during the April through October period, in line with year-earlier levels.
“If dry natural gas production declines substantially more than we forecast or natural gas consumed for electricity generation increases more than we forecast due to hotter summer temperatures, then inventories could fall below our forecast, potentially resulting in higher prices,” EIA researchers noted.
EIA expects higher electricity consumption in 2024 across all major sectors, including “especially strong” growth in the residential sector.
“Much of the forecast year/year growth in residential electricity occurs this summer,” researchers said. “We expect a hotter summer this year, with 7% more forecast cooling degree days in 2Q2024 and 3Q2024 than the same quarters in 2023.”
Despite forecast lower natural gas prices, the updated STEO predicted slowing growth in natural gas-fired electric generation amid increased generation from solar.
“We expect the share of total U.S. natural gas-fired generation in 2024 to average 42%, similar to 2023, before declining to 41% in 2025,” researchers said. “We don’t expect any new combined-cycle gas turbine plants in 2024, another reason why natural gas-fired generation makes up a smaller portion of electricity generation.”
Meanwhile, the United States will export 12 Bcf/d of LNG on average in 2024, up 2% year/year, according to the latest STEO.
Liquefied natural gas exports are then set to rise another 2 Bcf/d in 2025 as new facilities currently under construction enter service and ramp up to full capacity, the agency said.
In the meantime, LNG exports for April and May are likely to lag year-earlier levels amid maintenance and lower overseas demand during the shoulder months, EIA said.
