After June brought higher cooling demand and a widening storage deficit, the Energy Information Administration (EIA) said it is raising its projected average Henry Hub natural gas spot price to $3.21/MMBtu for 2021.
The latest price forecast, published in the July edition of the agency’s Short-Term Energy Outlook (STEO), represents a 14-cent increase over the previous month’s projections. The higher expected Henry Hub average comes as June brought a sequential 4.3 Bcf/d increase in domestic natural gas consumption, driven by power burns, according to the STEO report.
“In June, warm weather meant that cooling degree days were 9.6% higher than the 10-year average, prompting strong electric power sector demand in response to elevated household air conditioning use,” EIA researchers said.
The strong demand within U.S. borders during the month coincided with continued “high levels” of liquefied natural gas exports, which averaged an estimated 9.0 Bcf/d in June, a record for the month, according to EIA.
U.S. natural gas stockpiles ended June 25 at a 143 Bcf deficit to the five-year average, compared with a 61 Bcf deficit for the week ending May 28, the agency said.
“We forecast that flat U.S. natural gas production this summer combined with record U.S. natural gas exports will contribute to slightly lower-than-average inventory builds during the remainder of the summer build season,” EIA said.
EIA said it expects average Henry Hub spot prices to fall to $3.00 in 2022.
June saw strong demand for natural gas in electric generation. However, EIA still expects less use of the fuel in the power sector because higher prices this year should result in an overall decline in domestic consumption of 1.1% from 2020 levels. Domestic consumption is expected to then climb 0.7% year/year in 2022.
Natural gas is on track to account for 36% of U.S. electric generation on average this year and again in 2022, down from 39% in 2020, according to the latest STEO.
“Because we expect higher natural gas prices, we forecast coal’s generation share to rise from 20% in 2020 to 24% this year but to fall to 22% next year,” researchers said.
Wind and solar are expected to account for a rising share of generation, up from 11% in 2020 to 15% in 2022. Drought conditions in the West, meanwhile, will see hydropower account for 6% and 7% of U.S. generation in 2021 and 2022, respectively, versus 8% in 2020, according to EIA.
EIA expects total energy-related carbon dioxide emissions to increase 7.1% this year and another 1.5% in 2022. Those increases would follow an 11.1% 2020 emissions decline.
“Even with growth over the next two years, forecast emissions in 2022 remain 3.3% lower than in 2019,” researchers said.
© 2021 Natural Gas Intelligence. All rights reserved.
ISSN © 1532-1231 | ISSN © 2577-9877 | ISSN © 1532-1266 |