NEW YORK (Pakistan Point News / Sputnik - 11th May, 2022) US natural gas prices are expected to trade at around 14-year highs of above $8 in the coming months as storage levels for the fuel persistently stay below key five-year averages, the Energy Information Administration (EIA) said in its latest monthly forecast.
The front-month natural gas contract on the New York Mercantile Exchange's Henry Hub settled at $7.385 per million metric British thermal units (mmBtu) on Tuesday, and the EIA forecast an average price $8.59 per mmBtu for the fuel during the second half of the year. Henry Hub gas hit 2008 highs of $8.989 per mmBtu last week.
"We expect the Henry Hub price to average $7.83/MMBtu in 2Q22 and average $8.59/MMBtu in 2H22," the agency said in its monthly Short-Term Energy Outlook. "High forecast natural gas prices reflect our expectation that natural gas storage levels will remain less than the five-year (2017-2021) average this summer."
Natural gas in storage is currently at around 1.5 trillion cubic feet, or about 20% below the five-year average.
The EIA said the lower-than-average storage was partly due to limited opportunities for natural gas-to-coal switching for power generation - as coal prices have also been relatively high amid strained supplies and continued environmental resistance toward the latter.
The limited use of coal in the United States will likely keep gas demand for power generation high, despite its prices, the EIA said.
"Natural gas prices could rise significantly above forecast levels if summer temperatures are hotter than assumed in this forecast and electricity demand is higher," it said. "In addition, we expect that US liquefied natural gas exports (LNG) will remain high during the summer."
However, beyond this year, natural gas prices could halve, with the EIA forecasting a Henry Hub average of just $4.74 in 2023.
"The forecast drop in prices for 2023 reflects our expectation that the rate of natural gas production will increase next year while LNG export and demand growth slow, contributing to higher storage levels in 2023 than in 2022," the EIA added.
Exports of LNG, or liquefied natural gas, are expected to climb to an average of 12 billion cubic feet per day (bcfd) for all of this year, up 23% from 2021, largely due to European demand for US LNG after the sanctions imposed on Russian gas.
But demand for US LNG is only expected to grow by only 5% in 2023 due to constraints in capacity expansion, thus limiting the rally in gas prices, the EIA said.
