Because natural gas withdrawals from storage have picked up with January’s colder temperatures and U.S. production tailed off a bit in November, the Energy Information Administration (EIA) said Tuesday it has decided to leave its price forecasts for the next two years almost unchanged: $2.64/MMBtu this year and $3.22/MMBtu next year.

“Warmer-than-normal temperatures in the first half of the heating season, record inventory levels, and production growth contributed to spot prices remaining low through December, but seasonably cold weather in the beginning of 2016 and increases in consumption likely contributed to the price increase in January,” EIA said in its latest Short-Term Energy Outlook (STEO).

The 2016 price estimate is down just a penny and the 2017 estimate unchanged from EIA’s previous STEO (see Daily GPI, Jan. 25). Henry Hub spot prices averaged $2.63/MMBtu in 2015, according to EIA. The agency’s price forecasts declined steadily throughout 2015 (see Daily GPI, Dec. 8, 2015; Jan. 13, 2015).

Henry Hub prices averaged $2.28/MMBtu last month, an increase of 35 cents from December, according to the STEO. Natural gas futures prices for May 2016 delivery (for the five-day period ending Feb. 4) averaged $2.23/MMBtu.

Current options and futures prices imply that market participants place the lower and upper bounds for the 95% confidence interval for May 2016 contracts at $1.57/MMBtu and $3.16/MMBtu, respectively. At this time last year, the natural gas futures contract for May 2015 averaged $2.71/MMBtu and the corresponding lower and upper limits of the 95% confidence interval were $1.79/MMBtu and $4.11/MMBtu, EIA said.

Total marketed production averaged 79.2 Bcf/d in November, a slight decline from October, EIA said. “Small increases in onshore Lower 48 and Alaska production offset a 6% decline in Gulf of Mexico production in November,” according to the agency. Marketed production averaged 79.1 Bcf/d last year (a 5.7% increase from 2014), and EIA expects growth will slow to 0.7% this year as low natural gas prices and declining rig activity begin to affect production. But in 2017 EIA expects production growth to increase to 2.0%, as forecast prices rise, industrial demand grows, and liquefied natural gas (LNG) exports increase. Production of dry natural gas is forecast to grow by 0.4% in 2016 and by 2.0% in 2017.

LNG gross exports will increase to an average of 0.5 Bcf/d in 2016 with the start-up of Cheniere’s Sabine Pass LNG liquefaction plant in Louisiana, EIA said (see Daily GPI,Jan. 14). LNG exports will average an estimated 1.3 Bcf/d in 2017 as Sabine Pass ramps up its capacity, according to the STEO.

Total natural gas consumption is expected to average 76.4 Bcf/d this year and 77.3 Bcf/d next year, compared with 75.4 Bcf/d in 2015.

“Increases in industrial sector consumption drive total consumption growth in 2016 and 2017,” EIA said. “Industrial sector consumption of natural gas increases by 3.3% in 2016 and by 2.3% in 2017 as new projects in the fertilizer and chemicals sectors come online.” EIA expects a 0.1 Bcf/d (0.2%) decline in consumption of natural gas for power generation in 2016 and a 0.9% decrease in 2017. Consumption in the residential and commercial sectors is projected to increase “modestly” in 2016 and 2017.

On Nov. 20, natural gas inventories reached a record high 4,009 Bcf. By Jan. 1, they had slipped to 3,643 Bcf. Last week, EIA reported a 152 Bcf withdrawal for the week ending Jan. 29, which left inventories at 2,934 Bcf (see Daily GPI, Feb. 4).

“Withdrawals during the heating season were relatively low until the end of December because of warmer-than-normal temperatures, but even as withdrawals accelerated in January, inventories remained well above the five-year (2011-15) average,” EIA said in the latest STEO. “Jan. 29 inventories were 490 Bcf (20%) above year-ago levels and 445 Bcf (18%) above the five-year average for that week. Inventories are forecast to be 2,096 Bcf at the end of March 2016, which would be 474 Bcf above the five-year average for the end of March.”