LNG

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 said high levels of US liquefied natural gas exports would continue in 2022 and would average 12.2 billion cubic feet per day for the year, a 25 percent increase from the LNG export levels registered in 2021.

US liquefied natural gas exports increased to an average 3.7 billion cubic feet per day in August, an improvement of 19 percent over the previous month of July amid rising spot and forward natural gas prices in Europe and Asia, according to the government’s Short-Term Energy Outlook.

The report noted that natural gas and LNG prices had fallen to record lows in late May and June as Covid-19 mitigation efforts reduced global consumption.

“Higher global forward prices indicate improving netbacks for buyers of US LNG in European and Asian markets for the upcoming fall and winter seasons,” said the latest report from the Energy Information Administration.

The EIA report cited forecasts of natural gas demand recovery and potential LNG supply reductions because of maintenance at some plants.

“EIA forecasts that US LNG exports will return to pre-COVID levels by November 2020 and will average more than 9 Bcf per day from December 2020 through February 2021,” added the report.

The Henry Hub natural gas spot price averaged $2.30 per million British thermal units in August, up from an average of $1.77 per MMBtu in July.

“Higher natural gas spot prices reflect rising demand for natural gas from the US electric power sector as a result of warmer-than-normal temperatures during August and rising demand for US LNG exports amid declining US natural gas production,” stated the report.

The EIA expects that rising domestic demand and demand for LNG exports heading into winter, combined with reduced production, will cause Henry Hub spot prices to rise to a monthly average of $3.40 per MMBtu in January 2021.

“Monthly average spot prices will remain higher than $3.00 per MMBtu for all of 2021, averaging $3.19 per MMBtu for the year, up from a forecast average of $2.16 per MMBtu in 2020,” it forecast.

The agency estimates that total US working natural gas in storage ended August at 3.5 trillion cubic feet, 13 percent more than the five-year (2015-2019) average.

The EIA expects inventories to reach almost 4.0 Tcf on October 31, which would be 6 percent more than the five-year average.

Total US consumption of natural gas is expected to fall in 2020 compared with the previous year.

“Consumption will average 82.7 billion cubic feet per day in 2020, down 2.7 percent from 2019,” said the report.

“The largest decline in consumption occurs in the industrial sector,” it added.

“EIA forecasts industrial consumption will average 21.9 Bcf per day in 2020, down 1.0 Bcf per day from 2019 as a result of reduced manufacturing activity,” according to the Outlook.

“The decline in total US consumption also reflects lower heating demand in early 2020, contributing to residential and commercial demand in 2020 averaging 12.9 Bcf per day (down 0.8 Bcf per day from 2019) and 8.8 Bcf per day (down 0.8 Bcf/d from 2019), respectively,” it explained.

The EIA expects US natural gas consumption will average 79.1 Bcf per day in 2021, a 4.3 percent decline from 2020.

“The expected decline is the result of rising natural gas prices that will reduce demand for natural gas in the electric power sector,” it stated.