The U.S. Energy Information Administration (EIA) is slashing its winter Henry Hub spot price forecast on a combination of elevated production and weak space heating demand for natural gas so far this season.
EIA said in its latest Short-Term Energy Outlook (STEO) it now expects the national benchmark to average $2.80/MMBtu this winter, down 60 cents from month-earlier projections.
With mild weather-driven demand and rising domestic output padding inventories, the agency also revised its projected end-March storage carryout to more than 2 Tcf, or 22% above the five-year average. In last month’s STEO, EIA had called for inventories to exit March 2024 at a little under the 2 Tcf threshold.
Henry Hub averaged $2.71 in November, a 27-cent discount versus October as prices were pressured lower by an increase in domestic natural gas production in October and November, according to the agency.
NGI’s Bidweek Survey similarly recorded a $2.710 price at Henry Hub for December baseload delivery. A month earlier, Henry Hub averaged $3.165 in bidweek trading, NGI data show.
Looking ahead, EIA’s latest STEO forecast would appear somewhat bullish versus market sentiment. According to NGI’s Forward Look, Henry Hub fixed prices through the remainder of winter (January, February and March contracts) were recently trading at an average of just $2.347.
“U.S. dry natural gas production averaged about 105 Bcf/d in November, the most for any month on record,” researchers said. “U.S. dry natural gas production averaged almost 103 Bcf/d in 1H2023 and has increased in most months during 2H2023. We forecast dry natural gas production to remain close to 105 Bcf/d for the rest of winter.”
Lower 48 storage entered the winter heating season at more than 3,800 Bcf, or at a 5% cushion to the five-year average, EIA said. Reduced consumption and increased production saw inventories end November at 3,771 Bcf, 7% higher than the five-year norm, the agency said.
Storage is on track to remain above the five-year average through the end of the heating season and throughout all of 2024, according to the latest STEO projections.
For the updated STEO, EIA modeled average residential/commercial demand of 40 Bcf/d for the rest of the winter, off 2% versus the five-year average.
“For the rest of the winter heating season, we forecast close-to-normal weather, with 44 fewer heating degree days than the five-year average,” researchers said. “...Extreme winter weather events or prolonged cold temperatures have the potential to cause more significant disruptions to markets.”
Renewables To Overtake Coal?
Meanwhile, EIA said it expects solar capacity additions to potentially lead to a new milestone for renewables in the domestic power sector in 2024.
“We expect solar and wind generation together in 2024 to overtake electric power generation from coal for the first year ever, exceeding coal by nearly 90 billion kWh,” researchers said.
Amid the growth in solar capacity, natural gas would remain the leading fuel source for U.S. electricity generation in 2024, EIA data show.
After growing 7% year/year in 2023, natural gas-fired generation is projected to grow 1% in 2024 to around 1,714 billion kWh, according to the latest STEO.
That would easily surpass the 599 billion kWh projected to be generated from coal domestically in 2024. Wind and solar are on track to account for a combined 688 billion kWh in 2024, according to EIA projections.
