Henry Hub natural gas spot prices will average $5.67 per MMBtu between October and March next year, according to the US Energy Information Administration’s (EIA) October ’Short-Term Energy Outlook’ (STEO) forecast.
This will be the highest winter price since 2007–2008 and reflects below-average storage levels heading into the winter heating season and strong demand for US LNG, despite a relatively slow growth in US natural gas production.
EIA said that it expected Henry Hub prices will soften after the first quarter of 2022, as production growth outpaces the rise in LNG exports, down to an average $4.01 per MMBtu for the year.
US LNG exports are heading for a record high this year, and the EIA forecast another record for next year.
LNG exports are forecast to average 9.7 bill cu ft per day this year (3.2 bill more than the 2020 record of 6.5 bill cu ft per day) and will overtake annual pipeline exports for the first time.
The year-on-year increase in LNG exports will coincide with a slight growth in US natural gas production.
As US LNG exports have grown faster than domestic natural gas production, inventories are lower than average. EIA estimated that at the end of September, total US natural gas inventories were 5.5% below the five-year (2016–2020) average.
Lower US inventories could contribute to more natural gas price volatility, particularly if any US region experiences a severe cold snap, which makes the price outlook for this winter very uncertain, the administration added.
For 2022, EIA predicted decreasing Henry Hub prices as anticipated growth in domestic natural gas production begins to outpace growth in US LNG exports. US production is expected to average 96.4 bill cu ft per day in 2022, or 3.9 bill more than this year, and US LNG exports will rise by a smaller 1.4 bill cu ft per day, during the period.
Faster production growth will put downward pressure on natural gas prices, the EIA forecast.
