Demand for natural gas is expected to prove greater this winter than last, based on projections for colder temperatures in the northern United States and a higher overall level of heating degree days (HDD), analysts at the American Gas Association (AGA) said Tuesday.

At the same time, demand for U.S. exports – both via pipeline to Mexico and liquefied natural gas (LNG) shipments to Europe and Asia – are elevated this year and are expected to remain so through the winter. That adds pressure to the demand side of the equation, according to AGA’s forecast.

Citing National Oceanic and Atmospheric Administration’s (NOAA) projections, AGA’s Brendan O’Brien, senior manager of energy analysis, said national HDDs are expected to be roughly 2% higher in number winter/winter. Based on 30-year historic averages, near-normal cold over the northern tier of the United States should more than offset projections for above-average temperatures over much of the Lower 48, he said.

Heating needs in northern regions typically drive winter demand for natural gas.

A swath of the Lower 48, from the Pacific Northwest into the Northern Plains, could experience a colder than usual winter, NOAA predicted, driving strong heating demand and supporting prices. NOAA’s outlook, which extends from December through February, also calls for wetter-than-average conditions across portions of the Pacific Northwest, northern Rockies, Great Lakes, Ohio Valley and western Alaska. Snowpack can intensify and extend freezing conditions.

Given that expectation and input via a survey of its members, AGA projected a 4% increase in U.S. residential heating demand this winter compared with the 2020/2021 season. Natural gas is the primary heating fuel used in 49% of American homes – more than any other fuel – according to AGA. Electricity is used in 40% of homes.

Meanwhile, ahead of winter, AGA said average demand to date in 2021 is up about 6 Bcf/d year/year, driven largely by exports of LNG and gas delivered via pipeline to Mexico.

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With domestic heating demand expected to add to consumption in coming months, natural gas futures have soared in recent weeks. Benchmark Henry Hub prices hit a 2021 high above $6/MMBtu earlier this month and approached the $6 level again early this week.

Compounding matters is flat production, said AGA’s Gina DeFrancesco, senior energy analyst. Production over the summer months hovered around 90 Bcf/d. That was above the pandemic-reduced level of about 87 Bcf/d in the comparable period of 2020, but not enough to keep pace with demand.

DeFrancesco said U.S. gas producers have been hesitant to ramp up output, though oil drillers are starting to increase activity. Because of higher activity by the oil producers, supplies of associated gas could rise over the winter months. That noted, “production has struggled to keep pace with booming demand.”

AGA expects U.S. stockpiles of natural gas at the end of October will be about 5% below the five-year average. The trade group estimated end-of-winter storage would be 12% below the five-year average. The bottom line result: Prices are likely to remain elevated through the winter, and consumers will absorb at least some of the higher costs. AGA noted federal estimates show home heating prices this winter could be up 30% when compared with a year ago.