Natural gas prices have staggered into the new year, but Henry Hub is set to recover to average near $5/MMBtu for the first quarter of 2023, according to updated projections from the U.S. Energy Information Administration (EIA).

Gas Prices

Despite dipping below $4 in early 2023, spot prices at Henry Hub will climb back above the $5 mark for late January into early February, the agency said in the January edition of its Short-Term Energy Outlook (STEO), published Tuesday.

The agency said it forecasts falling temperatures later this winter, and it also pointed to the scheduled partial restart of operations at the Freeport LNG terminal this month as a source of upward pressure on prices.

“Based on the most recent press release from Freeport LNG, we expect the facility to resume partial operations in January” and push U.S. liquefied natural gas export levels higher, researchers said. “However, any additional delays to the restart of Freeport, which was originally scheduled to restart partial operations in November, will contribute to downward pressure on prices in the near term.”

EIA said it expects U.S. residential/commercial demand to average around 46 Bcf/d in January, lighter than the prior five-year average on mild temperatures to start the month. 

Demand is set to average 43 Bcf/d in February, also below the prior five-year average, EIA said. The agency cited forecasts from the National Oceanic and Atmospheric Administration that “indicate above normal temperatures for February in the eastern part of the United States.”

Looking beyond the winter heating season, EIA predicted average Henry Hub prices near $5 for the final three quarters of 2023. A combination of higher domestic natural gas production, flat LNG export levels and declining domestic consumption from power generation and industrial demand sources will “limit upward pressure” on prices this year, researchers said.

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“Despite our expectation that new LNG export facilities and expansion projects will come online in 2024, we expect natural gas prices to be relatively flat — with the possibility of lower prices — due to continued increases in U.S. natural gas production,” EIA said. 

Production out of the Permian Basin and the Haynesville Shale will grow as new pipeline expansions come online this year and next, according to the agency.