Despite projecting higher-than-average temperatures across much of the United States this winter that would typically dampen gas-fired power demand, FERC on Thursday predicted rising natural gas prices for the period.
A newly released Federal Energy Regulatory Commission report, “2021-2022 Winter Energy Market and Reliability Assessment,” anticipates an average Henry Hub futures price of $5.63/MMBtu for November through February 2022. The price forecast represents a $2.85, or 103%, increase from the winter 2020-2021 settled futures price, FERC said in the report.
Among various hubs, FERC stated that it expects the highest winter 2021-2022 futures prices at the Algonquin Citygate hub near Boston: $18.18 — a sharp increase from $4.20 last winter. The Commission report cited limited New England pipeline capacity and stiffening global competition for liquefied natural gas (LNG) cargoes as key factors driving its Algonquin price projection.
Will New England Import More LNG?
“High expected natural gas prices in New England this winter could incentivize more LNG imports into the region,” FERC researchers said.
The FERC outlook predicted U.S. natural gas production to average 94 Bcf/d this winter — a 3.2 Bcf/d increase from the corresponding period in 2020-2021. In terms of average winter demand, the report assumed a 2.5% year/year increase to 111 Bcf/d.
“This forecasted demand increase primarily is due to an anticipated increase of 21% in LNG exports relative to last winter,” FERC stated. The Commission expects rising seasonal gas demand across the commercial, residential and industrial/other sectors.
Not all of FERC’s winter gas projections point upward, however.
Researchers are projecting an 8% decline in power burn against the winter 2020-2021 figure. Moreover, it cited the recent Energy Information Administration (EIA) forecast that gas storage inventories will begin winter 2021-2022 at 3,572 Bcf, 5% below the five-year average. More dramatically, propane storage levels are poised to start the season 20% below the five-year average, FERC added.
For the week ending Oct. 15, EIA reported total working gas in storage at 3,461 Bcf — down 458 Bcf from a year ago and 151 Bcf below the five-year average.
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