Due to cold weather disruptions in mid-January across the central US, in its latest Short-Term Energy Outlook (STEO), the US Energy Information Administration (EIA) estimates that US dry natural gas production decreased to 102 bcfd in January from a record high of 106 bcfd in December 2023. This was 3 bcfd less than the forecast made in the previous month's STEO.
EIA predicts that US natural gas production will recover in February, reaching 105 bcfd by March as the weather-related disruptions subside and will stay close to that level for the rest of the year. The forecast for full-year 2024 averages 104 bcfd, almost 1 bcfd less than EIA forecasted in last month’s STEO. The production is expected to rise in 2025, averaging over 106 bcfd.
On the consumption side, more than 118 bcfd of natural gas was consumed in the US in January, a new monthly record, driven by the electric power sector. Despite anticipating milder weather with 4% fewer heating degree days than usual for February and March, EIA still expects a 5% increase in US natural gas consumption in first-quarter 2024 compared with the same period in 2023, which was one of the warmest first quarters on record.
In January, increased natural gas consumption and reduced production resulted in a withdrawal of almost 920 bcf from storage for the month, the third-most ever. Nevertheless, due to starting January with storage levels 13% above the 5-year average, inventories remained higher than the 5-year (2019-2023) average. EIA forecasts that inventory declines in February and March will be less than the 5-year average, ending the winter heating season (November–March) around 1,910 bcf, 15% above the 5-year average.
The Henry Hub spot price averaged $3.18/MMbtu in January. However, spot prices were volatile, rising sharply to $13.20/MMbtu on Jan. 12 in anticipation of severely cold weather for the coming weekend. After the weekend, prices quickly fell and continued to decrease until Jan. 23, when the price hit the monthly low of $2.15/MMbtu.
EIA forecasts that mild weather for the remainder of the first quarter will keep the average Henry Hub spot price near $2.40/MMbtu during February and March. But volatility could return if severely cold weather emerges, even for a short period.
