In its latest Short-Term Energy Outlook, the US Energy Information Administration (EIA) forecasts the Henry Hub spot price to average $5.53/MMbtu from November through February and then generally decline through 2022, averaging $3.93/MMbtu for the year amid rising US natural gas production and slowing growth in LNG exports.
In October, the natural gas spot price at Henry Hub averaged $5.51/MMbtu, which was up from the September average of $5.16/MMbtu and up from an average of $3.25/MMbtu in first-half 2021. The rising natural gas prices in recent months reflect US natural gas inventory levels that are below the 5-year (2016–20) average. Despite high prices, demand for natural gas for electric power generation has remained relatively high, which along with strong global demand for US LNG, has limited downward natural gas price pressures.
EIA forecasts that US inventory draws will be similar to the 5-year average this winter, and EIA expects that factor, along with rising US natural gas exports and relatively flat production through March, will keep US natural gas prices near recent levels before downward price pressures emerge. Because of uncertainty around seasonal demand, EIA expects natural gas prices to remain volatile over the coming months with winter temperatures to be a key driver of demand and prices.
EIA also estimates that US LNG exports averaged 9.8 bcfd in October 2021, up 0.3 bcfd from September, supported by large prices differences between Henry Hub prices and spot prices in Europe and Asia. LNG exports resumed from Cove Point LNG in late October following maintenance completion.
In EIA’s forecast, LNG exports average 9.8 bcfd for all of 2021, up 50% from 2020. EIA expects LNG exports to increase this winter, averaging 11.0 bcfd from November through March. High levels of LNG exports will continue into 2022, averaging 11.5 bcfd for the year, up 17% from 2021. The forecast reflects EIA’s assumption that global natural gas demand remains high and several new natural liquefaction trains—the sixth train at Sabine Pass LNG and the first trains at the new LNG export terminal, Calcasieu Pass LNG—enter service.
US natural gas inventories ended October 2021 at more than 3.6 tcf, 3% less than the 5-year average for this time of year. Injections into storage this summer were below the previous 5-year average, largely as a result of more electricity consumption in June because of hot weather and increased exports, even as domestic natural gas production has remained flat. However, in recent weeks, storage levels have moved closer to average levels as injections outpaced the 5-year average in September and October. EIA expects natural gas inventories to fall by 2.1 tcf this winter, ending March at 1.6 tcf, which would be 4% less than the 2017–21 average for that time of year.
According to EIA’s estimates, dry natural gas production averaged 94.9 bcfd in the US in October, up from 94.5 bcfd in September and 91.9 bcfd in in first-half 2021. Production in the forecast rises to an average of 95.2 bcfd during the rest of this winter (November–March) and averages 96.7 bcfd during 2022, driven by natural gas and crude oil prices, which are expected to remain at levels that will support enough drilling to sustain production growth.