The U.S. Energy Information Administration (EIA) has released its latest forecast for the Henry Hub natural gas spot price, projecting lower prices for 2024 and 2025 compared to earlier estimates. According to the EIA’s November Short-Term Energy Outlook (STEO), the Henry Hub price is expected to average $2.17 per million British thermal units (MMBtu) this year, followed by a slight increase to $2.90 per MMBtu in 2025. This marks a downward revision from the previous STEO, where the EIA had forecasted prices of $2.28 per MMBtu in 2024 and $3.06 per MMBtu in 2025.
For the final quarter of 2024, the EIA predicts an average price of $2.37 per MMBtu, rising to $2.84 per MMBtu in the first quarter of 2025. The forecast continues with $2.45 per MMBtu in the second quarter, $3.01 per MMBtu in the third quarter, and $3.29 per MMBtu in the fourth quarter.
The EIA’s October STEO had projected higher prices for these periods, including a fourth-quarter price of $2.81 per MMBtu in 2024, and first-quarter 2025 prices reaching $3.16 per MMBtu.
Recent Natural Gas Market Trends
In its latest report, the EIA highlighted a drop in U.S. natural gas prices in October. The average Henry Hub price for the month was $2.20 per MMBtu, which was 4% lower than the September average of $2.28 per MMBtu. The EIA attributed this decline to lower natural gas consumption, particularly in the electric power sector, where demand dropped by 14% compared to September.
However, the EIA noted that despite this decrease, consumption in the electric power sector was still 13% above the five-year average for October. The agency also pointed to higher air conditioning use in certain regions, which increased demand for natural gas during unusually warm weather conditions.
Future Price Outlook and LNG Exports
Looking ahead, the EIA expects natural gas prices to rise through the first quarter of 2025, with an average price above $2.80 per MMBtu. The forecast for 2025 includes a more significant increase, with prices averaging $2.90 per MMBtu for the year—33% higher than the expected 2024 average. This increase is largely driven by rising exports of liquefied natural gas (LNG), which the EIA forecasts will increase by nearly two billion cubic feet per day in 2025, supported by strong global demand and expanding export capacity.
Analyst Projections
Other analysts have also weighed in on the natural gas market. A recent report from BMI, part of the Fitch Group, forecasts Henry Hub prices to average $2.4 per MMBtu in 2024 and $3.4 per MMBtu in 2025. Prices are expected to rise further in the coming years, reaching $3.8 per MMBtu in 2026 and 2027, and $4.0 per MMBtu by 2028. BMI attributes the price increases to growing demand from the U.S. LNG sector, particularly with three new LNG terminals set to begin operations by the end of 2025.
Similarly, JPMorgan projects the Henry Hub price to average $2.37 per MMBtu in 2024, with a rise to $3.50 per MMBtu in 2025. In its report, Standard Chartered Bank anticipates prices to reach $3.20 per MMBtu in the first quarter of 2025, with fluctuations throughout the year, averaging $3.25 per MMBtu in 2025 overall.
Natural Gas Storage and Market Dynamics
The EIA’s weekly natural gas storage report has also been a focus of attention. As of November 8, U.S. storage levels were 158 billion cubic feet higher than the previous year and 228 billion cubic feet above the five-year average. This surplus comes despite warm weather and increased consumption earlier in the year.
Frederick J. Lawrence, former Chief Economist at the Independent Petroleum Association of America (IPAA), noted that the U.S. market remains in a relatively comfortable position for natural gas storage. However, he emphasized that natural gas demand has been increasing, particularly in the residential and commercial sectors, which saw a significant rise of 23.8% compared to the previous week.
Lawrence also highlighted that natural gas exports have been rising, fueled by colder weather in Northeast Asia and Europe and supply risks related to Russian gas flows to Austria. As the U.S. faces declining net imports of natural gas from Canada, this is expected to further tighten the domestic market.
Market Sentiment and Election Impact
Both Lawrence and Jim Krane, a Research Fellow at Rice University’s Baker Institute, have pointed out that natural gas traders were caught off guard by higher-than-expected storage levels. Krane suggested that as oil production in the Permian Basin becomes more gas-heavy, the market may experience more surprises in the future. He also warned of potential risks stemming from election-related changes in U.S. energy policy.
As the U.S. prepares for future natural gas demands, including a surge in LNG exports, market dynamics will remain closely tied to both domestic and international factors, including weather patterns and geopolitical developments.
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