American households can expect significant increases in home heating costs this winter, including a 30% increase in natural gas expenditures versus last winter, the U.S. Energy Information Administration (EIA) said Wednesday.

The agency said as part of its latest Short-Term Energy Outlook (STEO) that it expects a 3% increase in average U.S. heating degree days this winter compared to last, based on forecasts from the National Oceanic and Atmospheric Administration. Winter/winter, EIA said it expects households to spend 54% more on propane, 43% more on heating oil and 6% more on electricity.

A scenario in which temperatures are 10% colder “significantly increases forecast expenditures,” while 10% warmer-than-expected temperatures still would see households paying more because of price increases, researchers said.

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Brent crude oil spot prices averaged $74/bbl in September, representing a $4 sequential increase from August prices and a $34 year/year increase, according to EIA. The agency pointed to “steady draws on global inventories” to the tune of 1.9 million b/d on average through the first nine months of 2021. The Organization of the Petroleum Exporting Countries and its allies, aka OPEC-plus, opting earlier this month to leave current production targets in place, has also helped push prices higher, EIA said.

In the latest STEO, EIA said it expects Brent prices to stay near current levels through the end of the year, averaging $81 for the fourth quarter, representing a $10 increase over the previous forecast. 

“The higher forecast reflects our expectation that global oil inventories will fall at a faster rate than we had previously expected owing largely to lower global oil supply in late 2021 across a range of producers,” researchers said.

EIA said it anticipates supply growth in 2022 from OPEC-plus, U.S. tight oil and other sources not part of OPEC, to “outpace slowing growth in global oil consumption” and lead Brent prices lower next year, down to a forecast annual average of $72.

How Much Did Henry Hub Prices Climb?

This comes as EIA’s expected 4Q2021 average Henry Hub spot price has skyrocketed over the past month. The agency now expects benchmark natural gas prices to average $5.80/MMBtu during the fourth quarter, an increase of $1.80 over projections issued a month earlier.

“In the current forecast, Henry Hub prices reach a monthly peak of $5.90 in January and generally decline through 2022, averaging $4.01 for the year amid rising U.S. natural gas production and slowing growth” in liquefied natural gas (LNG) exports, researchers said.

Inventory draws this winter are expected to slightly exceed the five-year average, according to EIA. This “along with rising U.S. natural gas exports and relatively flat production through January will keep U.S. natural gas prices near recent levels before downward pressures emerge.”

The Henry Hub natural gas spot price averaged $5.16 in September, up more than $1 from the August average of $4.07 and nearly $2 higher than the $3.25 average for the first half of 2021.

“The rising prices in recent months reflect U.S. natural gas inventory levels that are below the five-year average and continuing demand for natural gas for power generation use at relatively high prices,” researchers said.

Low natural gas storage levels at home and in Europe, and uncertainty around the amount of demand the market can expect this winter, should continue to drive price volatility in the coming months, EIA said.

U.S. stockpiles exited September at 3.3 Tcf, 5% below the five-year average. EIA said it expects inventories to exit the injection season at close to 3.6 Tcf. Winter heating would deplete inventories by an estimated 2.1 Tcf, leaving end-March storage levels at under 1.5 Tcf, 12% below the 2017-2021 average, according to the agency.

LNG exports averaged 9.3 Bcf/d in September, representing a 4% month/month decline. EIA said it is modeling 9.1 Bcf/d for October LNG exports, with exports expected to then increase in the coming months.

“Through this winter, LNG exports in the forecast average 10.7 Bcf/d as global natural gas demand remains high and several new LNG export trains” come online, researchers said.

On the supply side, U.S. dry natural gas production averaged an estimated 93.3 Bcf/d during the third quarter, up from 91.6 Bcf/d in the first half of the year, according to EIA.

“Production in the forecast rises to an average of 94.0 Bcf/d during the winter, and averages 96.4 Bcf/d during 2022, driven by natural gas and crude oil prices, which we expect to remain at levels that will support enough drilling to sustain production growth,” researchers said.