Higher natural gas production during the injection season is expected to offset low storage levels and will moderate upward price pressures this year, resulting in Henry Hub spot prices averaging $2.99/MMBtu for 2018, according to the Energy Information Administration (EIA).

Prices next year are expected to average slightly higher at $3.04/MMBtu, EIA said in its latest Short-Term Energy Outlook (STEO), which was released Tuesday.

The 2018 price forecast is unchanged from EIA's previous STEO, while the 2019 price forecast is down 4 cents from $3.08/MMBtu.

New York Mercantile Exchange contract values for October 2018 delivery traded during the five-day period ending July 5 suggest a price range of $2.37-3.59/MMBtu, encompassing the market expectation of Henry Hub prices in October at the 95% confidence level, EIA said.

The front-month natural gas futures contract for delivery at Henry Hub settled at $2.84/MMBtu on July 5, a decrease of 13 cents/MMBtu from June 1.

"Record-high natural gas production continues to limit upward price pressures," according to EIA, which estimates that natural gas production reached 81.8 Bcf/d in June, 9.2 Bcf/d higher than in June 2017. "However, for the four weeks ending June 28, cooling degree days were 23% higher than normal, putting some upward pressure on natural gas prices."

Futures prices increased to $3.02/MMBtu on June 15, the first time prices were more than $3.00/MMBtu since January. "Additional natural gas consumption for power generation helped to keep natural gas inventories about 500 Bcf below the five-year (2013–17) average through June, despite rising production."

Following the coldest April in more than two decades and a resulting delay to the start of the summer injection season, inventories are expected to increase at the five-year average rate of growth during the injection season to reach 3.5 Tcf on October 31,  9% lower than the five-year average for the end of October, EIA said.

On Friday, EIA said Lower 48 natural gas stocks saw a net 78 Bcf build for the week ending June 29, versus a 60 Bcf injection recorded a year-ago and a five-year average 70 Bcf build. Total working gas in underground storage stood at 2,152 Bcf as of June 29, versus 2,869 Bcf last year and five-year average inventories of 2,645 Bcf.

EIA estimates that dry natural gas production will average 81.3 Bcf/d in 2018, an 11% increase from 2017 levels, and will reach 84.5 Bcf/d in 2019. "The expected growth in natural gas production is largely in response to improved drilling efficiency and cost reductions, as well as higher crude oil prices that contribute to higher associated gas production from oil-directed rigs," according to the STEO. "Forecast natural gas production growth is supported by planned expansions in liquefied natural gas (LNG) and pipeline exports."

U.S. exports of natural gas, including exports via pipeline and as LNG, averaged 9.6 Bcf/d in 1Q2018, and pipeline exports to Mexico averaged 4.4 Bcf/d during the same period.