Warmer-than-average start to 2023 causes EIA to lower natgas forecast

HOUSTON (ICIS)–The US Energy Information Administration (EIA) said natural gas prices at the Henry Hub should average around $3.40/mBTU in 2023, 47% lower than in 2022.

A warmer-than-normal start to the year has reduced natural gas consumption to below average, the EIA said in its latest Short-Term Energy Outlook (STEO), released 7 February.

“US natural gas inventories fell by less than our expectations in January because of the warmer-than-average weather. With more natural gas in inventory, we reduced our forecast for natural gas prices over the coming year,” said EIA Administrator Joe DeCarolis. “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 has allowed US natural gas inventories to rise after a period of below-average levels. EIA expects natural gas inventories to remain above average through the summer.

Other key takeaways from the February 2023 STEO forecast include:

• EIA expects US electricity generation to decrease 2% in 2023, with even larger reductions in coal-fired generation. Less electricity generation largely stems from reductions in consumption in the residential and industrial sectors.
• EIA expects that US coal exports will increase by about 2% in 2023 and 9% in 2024, largely to supply growing demand in Europe and Asia. Europe has been using more coal for electricity generation as the region looks to limit its consumption of natural gas from Russia.
• Russia and China remain sources of uncertainty in EIA’s STEO forecasts. Global demand for jet fuel has increased as China’s economy has opened up following pandemic lockdowns. Russia’s crude oil exports have largely gone unchanged since the EU instituted a ban on seaborne crude oil imports from Russia.