The natural gas supply glut in the United States may have sunk commodity prices and put the squeeze on producers, but it’s likely to continue to benefit consumer pocketbooks this winter, according to the Energy Information Administration (EIA).
On average, U.S. households can expect to spend less on heating from October through March, researchers said in a note published Tuesday. Consumers who depend on natural gas for heat aren’t the only ones likely to see discounts this winter.
“EIA expects households that primarily use electricity or natural gas as their heating source to spend slightly less than last winter, households that use heating oil to spend 4% less and households that use propane to spend 16% less,” the agency said.
“Only natural gas bills in the South are likely to rise significantly, by about 4%, primarily as a result of higher regional natural gas prices.”
Heating oil is more common in the Northeast and is the most prevalent heating fuel in four Northeast states, while propane is more common in the Midwest, but it does not make up any state’s primary heating fuel, EIA said.
EIA based its forecast heating costs on projected fuel prices and consumption, along with weather projections from the National Oceanic and Atmospheric Administration (NOAA).
NOAA expects the United States to experience 3,635 heating degree days this winter, slightly warmer than the average taken from the previous 10 winters.
EIA said it also considered storage adequacy in its winter fuels projections, noting that natural gas inventories have “seen a significant rebound in the United States over the past year. Working natural gas inventories in the Lower 48 states began the injection season on April 1 almost 30% lower than the previous five-year average.
“By the end of October...EIA expects working gas inventories in the Lower 48 states to be 2% higher than the previous five-year average.”
Last year, the natural gas market entered the heating season with storage levels at a significant deficit to the five-year average, which helped send futures prices soaring to near $5/MMBtu last November.
However, continued growth in Lower 48 production has helped reestablish a supply cushion, with injections consistently outpacing the five-year average throughout the 2019 refill season.
The Natural Gas Supply Association recently said it expects the higher storage levels to put downward pressure on 2019/20 prices compared with last year.