In the first Short-Term Energy Outlook (STEO) to include forecasts for 2015, the U.S. Energy Information Administration (EIA) predicted Tuesday U.S. natural gas output this year would increase on average about 2.1% from 2013. Prices now are seen averaging about $3.89/MMBtu, up 11 cents from last month's forecast.

In last month's STEO, EIA said it expected this year's gas price to average $3.78 (see Daily GPI, Dec. 10, 2013). Prices averaged $3.73/MMBtu for 2013 overall, according to federal analysts. However, the Polar Vortex, which has swept the country on the backside of a frigid December, has sent gas prices soaring (see related story).

In addition, December's cold weather significantly impacted demand, supply and prices across the country, EIA said. Widespread freeze-offs occurred last month, disrupting production for several days across the Piceance, Uinta, San Joaquin and Williston basins, and leading to the largest storage withdrawal for the week ending Dec. 13 since recordkeeping began in 1994, STEO said.

Analysts suggested in the latest STEO that the Northeast may not be as compelling for producers looking for the best price for their gas.

With Marcellus Shale growth causing forward natural gas prices in the Northeast to fall even with or below Henry Hub prices outside of peak-demand winter months, some drillers this year may begin moving back to the Gulf Coast production areas, where prices in plays like the Haynesville and Barnett shales are closer to the spot price, the EIA said.

A separate brief issued by EIA also on Tuesday said New England and New York had the biggest gas price gains in 2013, with the average wholesale price for natural gas at Henry Hub in Erath, LA, rising 35% to $3.73/ MMBtu. Increased winter demand last year "pushed inventories down and prices up to above $4.00/MMBtu in March and April, but decreased consumption for electric generation over the summer and positive (but flattening) production growth kept 2013 prices at their lowest level since 2002 with the exception of 2012," forecasters said.

"The price increases were relatively uniform, except in the northeastern United States, where cold-weather-driven demand spikes exacerbated the impact of pipeline constraints in Boston and New York City markets."

Natural gas consumption last year averaged a record high 71.2 Bcf/d, up 1.5 Bcf/d (2.1%) from 2012, EIA said. However, demand is seen falling this year before gaining again in 2015.

"Projected natural gas consumption falls by 1.6 Bcf/d (2.2%) in 2014 because of the forecast 4.6% decline in heating degree days and lower natural gas use by the electric power sector," said EIA analysts. " In 2015, natural gas consumption increases by 1.4 Bcf/d with growth in use by the industrial and electric power sectors."

The projected year/year increase in gas prices from 2014 to 2015 would contribute to a decline in gas used for power generation to 21.7 Bcf/d this year from 22.3 Bcf/d in 2013 and 24.9 Bcf/d in 2012.

However, as coal power plant retirements rise in 2015 in response to implementing the federal mercury and air toxic standards, by 2015 "EIA expects natural gas consumption in the power sector to increase to 22.6 Bcf/d."

Going forward, long-term gas production declines are seen continuing in the Gulf of Mexico, falling slightly this year and moderately in 2015. However, growing domestic output would continue to replace Canadian pipeline imports and increase exports to Mexico.

"EIA projects net imports of 3.0 Bcf/d in 2014 and 2.5 Bcf/d in 2015, which would be the lowest level since 1986," analysts said. The United States isn't expected to become a net gas exporter before 2018.

In 2015, domestic gas output is forecast to increase more slowly, at a rate of around 1.3%, on prices averaging $4.11/MMBtu, STEO said.