Natural gas spot prices at Henry Hub will average roughly $9/MMBtu during the fourth quarter before retreating to around $6 on average in 2023 amid rising domestic production, according to the latest projections from the Energy Information Administration (EIA).

Spot prices at the national benchmark averaged $8.80 in August, versus $7.28 in July, the agency said in the latest edition of its monthly Short-Term Energy Outlook, published Wednesday. 

In last month’s STEO, EIA modeled Henry Hub averages of $7.54 for the back half of 2022 and $5.10 for 2023.

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The general downward pressure for natural gas prices heading into 2023 comes as EIA expects U.S. dry gas production to average 99.0 Bcf/d in the fourth quarter, up from 94.6 Bcf/d in 1Q2022. Output will then climb to 100.4 Bcf/d in 2023, the latest STEO data show.

Natural gas prices rose during the month of August as continued strength in power burns kept inventories at a deficit to the prior five-year average, researchers said.

U.S. natural gas in storage exited August at 2.7 Tcf, 12% below the five-year average, EIA said.

“We forecast that inventories will end the injection season…at more than 3.4 Tcf, which would be 7% below the five-year average,” researchers said.

As for the demand outlook, the latest STEO models domestic consumption of 86.6 Bcf/d in 2022, a 3.6 Bcf/d year/year increase. 

This reflects “increases across all consuming sectors,” according to the agency. “We expect consumption to fall by 1.9 Bcf/d in 2023 because of declines in consumption in the industrial and electric power sectors.”

The latest STEO models 11.7 Bcf/d of U.S. liquefied natural gas exports in the fourth quarter, a 1.7 Bcf/d increase over 3Q2022 levels.

“Factors that will affect the volume of LNG exports in the coming months include the planned outage at Cove Point in October and Freeport LNG resuming partial operations by mid- to late-November,” researchers said.

EIA forecast total U.S. liquefied natural gas exports of 12.3 Bcf/d for 2023.

Brent To Average $98

Meanwhile, the latest STEO forecasts average Brent crude oil prices of $98/bbl in 4Q2022 and $97 in 2023. Potential supply disruptions and “slower-than-expected” production growth continue to create risks for higher prices, researchers said.

Global consumption of petroleum and liquid fuels clocked in at 99.4 million b/d in August, a 1.6 million b/d increase over year-earlier levels, EIA said. Consumption is expected to see a 2.1 million b/d year/year increase for 2022 as a whole before rising another 2.0 million b/d in 2023, according to the agency.

“As a result of high natural gas prices globally, we increased our forecast for oil consumption in 4Q2022 and 1Q2023 as electricity providers, particularly in Europe, may switch to oil-based generating fuels,” researchers said.

The updated STEO models U.S. crude oil production of 11.8 million b/d for 2022 and 12.6 million b/d in 2023.