US natural gas prices will remain below $3/mmBtu in the near future because of higher production and elevated inventories, the US Energy Information Administration (EIA) said today.
The Henry Hub spot price was forecast to average between $2.60/mmBtu and $2.70/mmBtu this year, the EIA said in its monthly Short Term Energy Outlook. Henry Hub spot prices last year averaged $2.54/mmBtu, down from an average of $6.42/mmBtu in 2022 after a milder 2022-23 winter slashed gas demand for heating and left inventories well above the five-year-average by the spring. The Henry Hub spot price next year should increase to an average of $2.90/mmBtu as LNG exports increase, the EIA predicted.
US gas inventories likely began this year with 14pc more gas in storage than the five-year-average because of milder weather in November and December. The EIA expects demand growth to outpace supply growth by 700mn cf/d (20mn m³/d) this year, which should reduce the surplus to 8pc of the five-year-average by the end of the year. But inventories were projected to remain high enough by the end of 2024 to limit significant upward price pressure.
The trend of higher domestic production was forecast to continue this year.
Natural gas supply, which includes production and imports, was forecast to increase by more than 1 Bcf/d this year, as production rises by 1.5 Bcf/d and imports fall by a 400mn cf/d. Dry gas output should average 105 Bcf/d this year before rising to an average of 106.4 Bcf/d in 2025, the EIA predicted.
Gas demand, which includes domestic consumption and exports, was forecast to increase this year by almost 2 Bcf/d on higher exports, according to the EIA.
Colder weather forecast in the coming weeks should drive residential and commercial gas use higher this year compared with last year. Gas-fired power use should also increase slightly this year, but a decrease in gas use by industry will offset gains in other sectors.
US gas demand in 2025 was forecast to rise by 2.4 Bcf/d as more LNG export capacity comes on line. LNG exports should grow by 2.1 Bcf/d next year to average 14.4 Bcf/d.
US gas demand in 2025 was forecast to exceed supply growth by 1 Bcf/d, the EIA said.
More potential for upward price pressure is expected next year compared with 2024, but above-average storage levels should limit overall gains. The potential remains for significant price gains, however, because of weather uncertainty and expected shifts in the mix of power generation sources, the EIA said.
