Updates number for end-of-October gas inventories in third paragraph.
US natural gas inventories are forecast to reach closer to the five-year average by the start of winter than previously forecast because of the unexpected shutdown of the Freeport LNG terminal, the US Energy Information Administration (EIA) said today.
That 8 June shutdown from a fire at the terminal returned about 2 Bcf/d (57mn m³/d) to US markets, the EIA said in its monthly Short Term Energy Outlook (STEO). Freeport should return to partial service in October and resume full service at year-end.
Inventories were forecast to reach 3.5 Tcf by the end of October, 6pc lower than the five-year average and slightly higher than the EIA's previous forecast of 3.3 Tcf. Working gas inventories ended March at 1.4 Tcf, 17pc below the five-year average and the least gas held in US underground storage at the end of March since 2019, the EIA said.
Henry Hub spot prices averaged $6.07/mmBtu in the first half of 2022, the EIA said, rising from $4.38/mmBtu in January to $8.14/mmBtu in May on continued demand for LNG exports, higher gas-fired power demand and lower output compared with the end of 2021. But prices at the hub fell in June after the terminal shut down.
Gas prices have been volatile this year, driven by global gas market uncertainty from Russia's invasion of Ukraine and weather-related demand fluctuations, the EIA said.
Spot prices were forecast to average $5.97/mmBtu for the second half of 2022, a significant drop from the EIA's previously forecast price of $8.58/mmBtu, on estimations that Freeport will be off line through late 2022. Henry Hub was forecast to average $4.76/mmBtu next year.
US LNG exports averaged 11.2 Bcf/d during the first half of 2022, setting a monthly record in March of 11.7 Bcf/d, the EIA said. Strong gas demand and higher LNG prices in Europe and Asia drove the continued growth of US LNG exports. During the first five months of 2022, the US exported 71pc of its LNG to Europe, compared with an annual average of 34pc last year. In the past, Asia was the main destination for US LNG exports, accounting for almost half of total exports in 2020 and 2021.
US LNG export capacity will continue to expand this year with the addition of the Calcasieu Pass LNG terminal, which has been ramping up ahead of schedule and is expected to be fully operational in late 2023.
US LNG exports were forecast to average 10.5 Bcf/d for the remainder of the year, 14pc lower than the EIA forecast in last month's STEO, amid the Freeport shutdown. But US LNG exports will continue to grow next year, averaging 12.7 Bcf/d, 17pc higher than in 2022.
US gas consumption was forecast to increase by 3pc this year from a year earlier to 85.9 Bcf/d before falling to 85.4 Bcf/d in 2023. Consumption will increase across all sectors, accelerating the most in the electric power sector amid limited coal-fired power generation. But the EIA expects gas use for power generation to decline by 1pc next year as more renewable energy comes on line.
Higher energy prices will also contribute to an overall increase in drilling activity this year and next. US dry-gas production this year was forecast to average 96.2 Bcf/d, up by 3pc from 2021. In 2023, dry-gas output will grow by 4pc to 100 Bcf/d.
The Permian basin in west Texas and southeastern New Mexico and the Haynesville shale in east Texas and northern Louisiana will drive overall output amid increased pipeline takeaway capacity in both regions and higher crude production in the Permian.

