LNG

The United States forecasts that the nation’s natural gas supply will increase to meet growing demand for domestic pipeline gas and liquefied natural gas exports, though benchmark Henry Hub prices are expected to remain subdued as US oil and gas production increases to new record levels.

While the US is now one of the world’s largest LNG exporters, the government said states in the Northeast US will pay the highest electricity prices because of inadequate natural gas pipeline supplies, reduced inventories and difficulties in securing LNG shipments for domestic use because of tight global supplies and high prices.

“We forecast that wholesale electricity prices at major power trading hubs will be about 20-60 percent higher on average this winter,” said the Energy Information Administration in its short-term and winter energy outlook.

“The highest wholesale electricity prices are likely to be in New England because of possible natural gas pipeline constraints, reduced fuel inventories for power generation and uncertainty regarding liquefied natural gas shipments given the tight global supply conditions,” explained the EIA report.

The report’s conclusions mean that people in the states of Maine, Vermont, New Hampshire, Massachusetts, Connecticut and Rhode Island will pay the highest power bills in the nation this winter.

The US benchmark Henry Hub natural gas price is expected to remain above $7 per million British thermal units in the winter season.

Henry Hub price

“We expect the Henry Hub natural gas spot price to average about $7.40 per MMBtu in the fourth quarter and then fall below $6.00 per MMBtu in 2023 as US natural gas production rises,” said the EIA report.

“We forecast that US natural gas inventories will end the injection season (April-October) at nearly 3.5 trillion cubic feet, which would be 6 percent below the five-year (2017-2021) average,” the report added.

US consumption of natural gas is forecast as averaging 87.9 billion cubic feet per day in 2022, up 3.9 Bcf per day from 2021 and reflecting more consumption across almost all sectors.

US dry natural gas production averaged 98.5 Bcf per day in the third quarter.

“We forecast natural gas production will average 99.1 Bcf per day in the fourth quarter and 99.6 Bcf per day in 2023,” stated the EIA.

Natural gas will fuel 38 percent of US electricity generation in 2022, up from 37 percent in 2021.

Renewables and coal

“Growing generation from renewable sources limits growth in natural gas-fired generation and coal’s generation share declines because of the expected retirement of some coal-fired capacity,” the report explained.

The outlook forecasts Brent crude oil spot prices averaging $93 per barrel in the fourth quarter and $95 per barrel in 2023.

“Potential petroleum supply disruptions and slower-than-expected crude oil production growth could lead to higher oil prices, while the possibility of slower-than-forecast economic growth may contribute to lower prices,” said the EIA.

“US crude oil production is forecast to average 11.7 million barrels per day in 2022 and 12.4 million barrels per day in 2023, which would surpass the record high set in 2019,” the report added.

The US Government forecasts that natural gas prices will remain high in the coming months because of a combination of more demand, lower short-term domestic natural gas production and the effects of Hurricane Ida on Gulf of Mexico output.

The latest US government energy report said the Henry Hub benchmark natural gas price from which the LNG price is derived is expected to increase to an average of $3.22 per million British thermal units in 2021 compared with last year’s average of $2.02 per MMBtu.