According to the U.S. Energy Information Administration (EIA) website article published in April 2023, at the end of March, typically considered the end of the U.S. storage withdrawal season (November– March), EIA estimate working natural gas in U.S. storage reached 1,856 billion cubic feet (Bcf), 19% more than the five-year (2018–2022) average. Lower-than-average withdrawals of natural gas from storage in the first quarter of 2023 (1Q23) resulted in natural gas inventories rising above the five-year average and contributed to falling natural gas prices. The natural gas spot price at Henry Hub averaged $5.45 per million British thermal units (MMBtu) in November 2022 and declined to average $2.31/MMBtu in March.
EIA expects U.S. natural gas inventories to increase by 1,985 Bcf during this year’s injection season (April– October), similar to the five-year average for summer injections, which would result in 8% higher inventories than last year’s end-of-October stocks. Natural gas inventories in our forecast total 3,842 Bcf at the end of October, 6% above the five-year average. Ultimately, natural gas inventories at the end of October will depend on temperatures throughout the summer. Other factors equal, a warmer summer than EIA forecast would result in more demand for cooling, leading to more natural gas consumption in the electric power sector and less natural gas in storage, putting upward pressure on natural gas prices.
Natural gas production
Dry natural gas production averaged 101.6 billion cubic feet per day (Bcf/d) in the United States during 1Q23, up 1.4% from 4Q22. Moderate weather in 1Q23 created no major production disruptions due to freeze-offs. Associated natural gas production from the Permian Basin and production from the Haynesville region, which established new records in early 2023, contributed to rising U.S. natural gas production in 1Q23. EIA forecast slight declines in U.S. natural gas production in April and May because of pipeline maintenance in West Texas and the Northeast, with U.S. production averaging 100.6 Bcf/d in our forecast for the remainder of 2023. In our forecast, U.S. natural gas production averages 100.9 Bcf/d for 2023, 3% more than in 2022. However, if production were to increase by more than our forecast, it could put downward pressure on natural gas prices. Alternatively, if declines are more than in our forecast, it would likely lead to higher prices, other factors equal.
Natural gas prices
EIA expects the U.S. benchmark Henry Hub natural gas spot price to average $2.65/MMBtu for 2Q23, unchanged from the 1Q23 average. Natural gas prices typically decrease in the spring as more moderate temperatures reduce demand for natural gas for space heating. However, a spring-like pattern emerged early this year, reducing natural gas consumption in the first two months of the year compared with both year-ago levels and the five-year average, reducing natural gas prices. EIA expects relatively flat U.S. natural gas production, rising demand for feed gas from Freeport LNG as the export terminal returns to full operations, and increased natural gas consumption in the electric power sector to raise natural gas prices through the summer. EIA forecast the Henry Hub price to average slightly more than $3.00/MMBtu in 3Q23.
