Natural gas spot prices at Henry Hub are on track to average $7.54/MMBtu for the second half of 2022 before falling to $5.10 in 2023 on rising production, the Energy Information Administration (EIA) said in its latest monthly forecast.

STEO

Prices at the national benchmark averaged $7.28 in July, EIA said in the updated edition of its Short-Term Energy Outlook, published Tuesday. That’s down sequentially from average prices of $7.70 in June and $8.14 in May, owing to incremental slack in the market following the extended outage at the Freeport LNG terminal, researchers said.

However, prices strengthened markedly between July 1 and July 29 amid “continued high demand” in the power sector, according to the agency.

“During May, June and July, the United States experienced 800 cumulative cooling degree days (CDD), or 69 (9%) more than the prior 10-year average and the most CDD for this time period since 2018,” researchers said. 

Researchers estimated 36.1 Bcf/d of natural gas power burn for May through July, a 2.1 Bcf/d year/year increase and 3.4 Bcf/d above five-year average levels.

Total domestic storage ended July at 2.5 Tcf, 12% shy of the five-year average, EIA said. That puts inventories on track to exit the injection season near 3.5 Tcf, which would represent a 6% deficit to the five-year average, according to the latest STEO.

U.S. dry natural gas production is set to average 97.1 Bcf/d this month and 96.6 Bcf/d for 2022, which would represent a 3% year/year increase. Production is set to then rise to an average of 100.0 Bcf/d in 2023, according to the agency.

On the demand side, domestic consumption will average 85.2 Bcf/d for 2022 overall, up 3% year/year, the STEO data show.

“Consumption in the electric power sector continues to increase as a result of limited switching from natural gas-fired generators to coal-fired generators for power generation, despite elevated natural gas prices,” researchers said. “In addition, rising U.S. natural gas consumption reflects increased consumption in the residential and commercial sectors as a result of colder temperatures on average in 2022 than in 2021.”

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The STEO models a 1.3 Bcf/d (minus 2%) year/year decline in domestic consumption in 2023.

Liquefied natural gas exports are set to average 10.0 Bcf/d for the third quarter and 11.2 Bcf/d for 2022, a 14% increase over year-earlier levels, EIA said.

The latest projections reflect Freeport’s liquefied natural gas export facility in Texas “resuming operations sooner than we had initially expected,” researchers said. EIA is forecasting U.S. LNG exports to average 12.7 Bcf/d in 2023.