U.S. natural gas price projections have been lowered as a warmer-than-average start to 2023 has reduced natural gas consumption to below-average levels, according to the U.S. Energy Information Administration (EIA). The projection reflects a nearly 30% price cut from January expectations.
The EIA released Tuesday (Feb. 7) the February Short-Term Energy Outlook that shows natural gas prices at the Henry Hub are expected to fall by 47% to $3.40 per million British thermal units in 2023 from 2022.
“U.S. natural gas inventories fell by less than our expectations in January because of the warmer-than-average weather,” said EIA Administrator Joe DeCarolis. “With more natural gas in inventory, we reduced our forecast for natural gas prices over the coming year. There is still a lot of uncertainty, including the possibility of extreme weather later this winter that could increase demand and temporarily slow down production, but those possibilities decrease as we approach spring.”
Increased natural gas production and less demand have contributed to rising natural gas inventories in the United States after a period of below-average levels. The EIA expects natural gas inventories to remain above average through the summer.
Following are other highlights from the Short-Term Energy Outlook:
Energy-related carbon dioxide emissions are expected to be 4% lower in 2023, from 2022, largely because of a 15% decrease in emissions from coal this year, DeCarolis said. U.S. electricity generation is projected to fall by 2% in 2023, largely due to falling consumption in the residential and industrial sectors.
- coal exports are projected to rise by 2% in 2023 and 9% in 2024 to meet rising demand in Europe and Asia. Europe has been using more coal for electricity generation as it looks to limit the consumption of natural gas from Russia. Still, U.S. coal production is expected to fall in 2023 and 2024 amid lower U.S. demand for coal, DeCarolis said.
Global demand for jet fuel has risen as China’s economy re-opened following pandemic lockdowns. Meanwhile, Russia’s crude oil exports have remained flat since the European Union banned seaborne crude oil imports from Russia. DeCarolis noted watching developments in Russia and China “because of their impact on the global energy sector.”
On Thursday (Feb. 9), the EIA expects to release a Short-Term Energy Outlook supplement on what’s driving the uncertainty in natural gas market forecasts.