The U.S. Energy Information Administration (EIA) has adjusted its projections for natural gas production and consumption in the first quarter of 2024, citing both record-breaking usage in January and anticipated shifts in weather patterns.
Despite January’s historic consumption of 118 Bcf/d, marking the highest recorded monthly consumption to date, the EIA has lowered its estimate for natural gas marketed production by 1.71 Bcf/d to 113.08 Bcf/d for the same quarter.
This adjustment comes alongside an upward revision in the agency’s forecast for U.S. natural gas consumption during Q1, now projected to reach 108.18 Bcf/d. EIA Administrator Joe DeCarolis emphasized the impact of cold weather in January, driving consumption to unprecedented levels but anticipates a decrease in consumption as February and March progress.
Mid-January saw disruptions in production due to cold weather, resulting in a decline in dry gas production to 102 Bcf/d compared to December’s record of 106 Bcf/d. However, the agency anticipates a rebound in production to 105 Bcf/d in February, remaining relatively stable throughout 2024.
Consequently, the EIA forecasts a decline in natural gas prices from January’s average of $3.18/MMBtu to approximately $2.40/MMBtu in February and March.
The EIA attributes the stable price forecast to robust inventories, which are expected to end the winter season at 1.9 Tcf, 15% above the prior five-year average. Mild weather forecasts for February and March are projected to further reduce consumption while increasing production, maintaining inventories above the five-year average by the end of the winter heating season.
Additionally, the EIA expects a decrease in heating degree days during February and March compared to the prior 10-year average for these months.
Despite the higher consumption estimates for January, the EIA’s forecasts for spot gas prices have seen minimal adjustments. However, the agency warns that cold spells could still induce price volatility.
The EIA’s forecast for Q1 Henry Hub natural gas spot prices has been adjusted marginally by 3 cents to $2.67/MMBtu, while the Q2 forecast has decreased by 2 cents to $2.20/MMBtu compared to the previous month’s estimates.
Looking ahead, the agency projects Henry Hub natural gas prices to average $2.65/MMBtu for the full year of 2024 and $2.94/MMBtu in 2025, showing a slight decrease from the previous month’s estimates.
The EIA highlights record levels of gas consumption in the power sector in January, projecting Q1 power sector gas consumption to be 5% above Q1 2023 levels, which was an unusually warm quarter.
However, LNG exports are expected to decline in February due to a partial outage at the Freeport LNG facility, with the EIA estimating Q1 gross LNG exports to average 11.69 Bcf/d, down from the 12.75 Bcf/d forecasted in the January outlook.
On the renewable energy front, the EIA continues to anticipate growth in solar and wind generation for 2024, albeit with a slight downward revision in its 2025 forecast for renewable sources due to reported lower capacity additions in recent months.
Fossil fuel-sourced generation growth is slowing, with gas projected to grow by 2% in 2024 compared to 7% in 2023, and coal-fired generation expected to decline by 8% in 2024.
Hydropower generation is forecasted to rise by 7% in 2024 due to higher water supply levels.
The Electric Reliability Council of Texas is expected to see significant solar generation growth at 90% in 2024, with wind generation rising by 8% in the region. The steepest declines in coal generation are anticipated in the Midwest in 2024, offset by gains in gas-fired generation, according to the EIA.