US EIA forecasts 34% higher natural gas price for rest of winter over year-ago period

The US Energy Information Administration said on Dec. 10 it expects Henry Hub natural gas spot prices to average $2.99/MMBtu December through March this winter compared to $2.23 over the same period last winter, a 34% increase.

The agency, in its December Short-Term Energy Outlook, noted that the year-over-year increase in gas prices during the period is coming despite forecasts for higher-than-average US gas inventories this winter heating season, which runs from Nov. 1 to March 31. The $2.99/MMBtu Henry Hub average forecast for December through March is lower than the $3.37/MMBtu average during the same months in winter 2022-23 and $4.43/MMBtu in the same period of winter 2021-22.

The EIA said the Lower 48 states began the winter season with 3.92 Tcf of gas in storage, 6% more than the 2019-2023 average, and it predicts that inventories will stay 2% above the 2020-2024 average to total 1.92 Tcf at the end of March. The agency also said that gas prices will remain in line with previous end-of-winter numbers despite the forecast increase, in part because of consistently low recent US gas prices.

"Recent natural gas prices have been historically low, so a colder winter than last will draw on storage and raise prices to some extent," EIA Administrator Joe DeCarolis said in a statement. "We expect natural gas prices will remain well below the high prices we saw in 2021 and 2022."

The agency said it expects gas inventories to fall by about 590 Bcf in December, or 34% more than the five-year withdrawal average for the month, citing forecasts for relatively flat gas production and current National Oceanic and Atmospheric Administration forecasts showing a colder-than-normal month. However, the EIA said it assumes weather will be milder the usual in the first quarter of 2025, leading to less gas withdrawals than typical for that period.

The EIA raised its forecast for fourth-quarter Henry Hub spot prices by 8 cents from November's estimate to $2.45/MMBtu and increased the first quarter of 2025 forecast 11 cents to $2.95/MMBtu.

The agency expects Henry Hub spot prices would average $2.19/MMBtu for full-year 2024 and $2.95/MMBtu in 2025, up slightly from November's estimates of $2.17/MMBtu and $2.90/MMBtu, respectively. Henry Hub prices averaged $2.54/MMBtu in 2023.

The EIA raised its gas consumption estimate by 1.9 Bcf/d to 93.5 Bcf/d for the fourth quarter of 2024, but kept its first quarter of 2025 forecast flat at 105.7 Bcf/d.

Production forecast

The EIA lowered its total gas marketed production estimate for the US in the first quarter of 2025 by 900 MMcf/d to 113 Bcf/d and reduced its fourth quarter estimate by 200 MMcf/d to 113.4 Bcf/d.

The agency expects dry gas production to average 103 Bcf/d in the first quarter, flat with the fourth quarter, but it forecasts that overall dry gas production for full-year 2025 will rise about 1% over 2024 because of increased production in the Permian and Eagle Ford regions.

"We also expect more production in the Haynesville region because of higher prices and increased demand from nearby new liquefied natural gas (LNG) export projects that will be ramping up production," the EIA said in the outlook.

As a result, the EIA expects that US LNG exports will rise in 2025 to 14 Bcf/d, 15% higher than 2024 forecasts. The agency said its forecast is supported by expanding export capacity at Venture Global's Plaquemines LNG and Cheniere Energy's Corpus Christi LNG Stage 3 projects, which are on track to start exporting LNG by the end of December.

Power demand, prices

Turning to power, the EIA forecasts that US electricity sales to all end users will total about 1,580 billion kWh for the winter heating season, around 2% more than last winter. The increase in power consumption will be driven by space heating demand resulting from an expected 6% increase in winter heating degree days, the EIA said.

The agency foresees the residential sector consuming 3% more electricity this winter than it did last season. The EIA expects the commercial sector will consume 2% more electricity in the same span because of the colder weather and continued growth in demand from data centers, and it predicts the industrial sector will use 2% more power, too.

The expectation of increased demand and colder weather was reflected in the EIA's wholesale power price forecasts, which included upward revisions for the first quarter of 2025 in some select major hubs. One of the largest revision's was seen in ISO-New England's Internal Hub, where wholesale power prices are now forecast to average $76.32/MWh in the first quarter, up 16% from last month's estimate of $65.96/MWh.

The lowest US wholesale power prices for the first quarter are forecast in the Electric Reliability Council of Texas' North Hub at $27.03/MWh.