The U.S. Energy Information Administration (EIA) cut its Henry Hub spot price forecast in its latest short term energy outlook (STEO), which was released this week.
In its latest March STEO, the EIA projects that the commodity will average $2.20 per million British thermal units (MMBtu) in the first quarter of this year, $1.79 per MMBtu in the second quarter, $2.28 per MMBtu in the third quarter, $2.82 per MMBtu in the fourth quarter, and $2.27 per MMBtu overall in 2024.
In its previous February STEO, the EIA forecast that the Henry Hub spot price would average $2.67 per MMBtu in the first quarter of 2024, $2.20 per MMBtu in the second quarter, $2.66 per MMBtu in the third quarter, $3.08 per MMBtu in the fourth quarter, and $2.65 per MMBtu overall in 2024.
“The U.S. benchmark Henry Hub natural gas spot price averaged an inflation-adjusted record-low of $1.72 per MMBtu in February,” the EIA stated in its March STEO.
“We forecast prices will stay under $2.00 per MMBtu in the second quarter of 2024 (2Q24) because we expect natural gas inventories will remain high relative to the five-year average as the United States enters the shoulder season when there is typically less U.S. natural gas consumption than at other times of the year,” it added.
“In our March STEO, the annual average Henry Hub price for all of 2024 averages almost $2.30 per MMBtu, 14 percent lower than in our February STEO,” the EIA continued.
The EIA noted in its March STEO that this winter, which it defined as November 2023 to March 2024, has been mild throughout much of the U.S. and stated that the country has experienced eight percent fewer heating degree days (HDDs) than the 10-year average.
“February was much milder than expected, with nine percent fewer HDDs than forecast in last month’s STEO,” the EIA said in the STEO.
“Because of the mild weather, we estimate combined residential and commercial sector consumption of natural gas this winter will be three billion cubic feet per day (Bcfpd), which is nine percent less than the previous five-year winter average,” it added.
“Reduced natural gas consumption for space heating and increased U.S. dry natural gas production, which we estimate will be about three Bcfpd more this winter compared with last winter, have contributed to above-average inventories,” it continued.
In its latest STEO, the EIA revealed that it expects U.S. inventories of natural gas will total 2,270 billion cubic feet at the end of the winter heating season on March 31. The organization highlighted in the STEO that this is 37 percent above the previous five-year (2019–2023) average for March, “contributing to historically low natural gas prices and to our expectation of low prices for the next several months”.
In a gas and LNG market update sent to Rigzone early on Thursday, Rystad Energy Senior Analyst Masanori Odaka said Henry Hub prices were down 13 percent to approximately $1.7 per MMBtu on March 12 “at the tail end of the winter demand season”.
“However, the market is approaching the floor for spot gas prices following recent news that Chesapeake Energy and EQT Corporation have curtailed gas production,” Odaka added in the update.
“This has started to materialize in Appalachia production levels, which have declined from highs of 35 Bcfpd in January to around 34 Bcfpd currently,” Odaka continued.
In that update, Odaka noted that Lower 48 gas storage continues to exceed the five-year range, “ensuring there is a short-term ceiling for prices and that withdrawals remain modest due to mild late-winter temperatures”.
“Storage levels are now 13.6 percent higher than in 2023 and nearly 31 percent higher than the five-year average. Late-winter temperatures are too mild to significantly impact storage,” Odaka said.
In a report sent to Rigzone this week, Standard Chartered projected that the NYMEX basis Henry Hub nearby future price will average $4.80 per MMBtu across the first and second quarters of 2024 and $4.70 per MMBtu across the third and fourth quarters.
J.P Morgan forecast in a report sent to Rigzone on February 26 that the U.S. natural gas Henry Hub price will average $2.45 per MMBtu in the first quarter of this year, $2.25 per MMBtu in the second quarter, $3.00 per MMBtu in the third quarter, $4.00 per MMBtu in the fourth quarter, and $2.93 per MMBtu overall in 2024.
