Natural Gas Prices Remain Volatile: EIA’s Latest STEO Report
By Natural gas prices remain highly volatile, according to the most recent Short-Term Energy Outlook (STEO) published by the U.S. Energy Information Administration (EIA) on Tuesday.[0] The agency estimated that Henry Hub gas prices would be an average of $3.40/MMBtu in 2023 and $4.04/MMBtu in 2024, which was lower than the $4.90/MMBtu and $4.80/MMBtu projected the prior month.[1] The restart of the Freeport LNG terminal, expected in the first quarter, would add 2 Bcf/d of demand back into the market, EIA added.[2]
The agency further predicted that U.S. LNG exports will increase by 11 percent on an annual basis in 2023 compared with 2022, and that dry gas production will rise to 100.27 billion cubic feet per day (bcfd) this year and 101.68 bcfd in 2024 from a record 98.09 bcfd in 2022.[3]
According to East Daley Analytics LLC, sub-$2.00 natural gas prices are now clearly in view due to the robust storage picture and the rapidly approaching spring shoulder season.[4] The risk of extreme weather events and production freeze-offs leading to price spikes at the Henry Hub and in regional markets decreases as we move into spring, especially since inventories have risen above the five-year (2018-2022) average.[2]
[4] Despite what Pennsylvania's famous groundhog may have predicted, the newest weather models are forecasting a mild pattern for the next couple of weeks, which could lead to a quick reversal of Monday's modest increase in futures.[5]
EIA also cut its Brent crude oil price forecast for this year to $83.63 per barrel.[6] Meanwhile, global liquid fuels consumption will increase by 1.1 million barrels per day (b/d) in 2023 and by 1.8 million b/d in 2024, driven primarily by growth in China and other non-OECD countries, the report projected.[7]
Technically, natural gas futures have seen a reversal from their lowest point on February 3rd, currently staying at a level that is 5% higher than the lows tested on that date.[8]
0. “EIA Slashes 2023 Henry Hub Forecast as Supply Growth Seen Outpacing Demand” Natural Gas Intelligence, 7 Feb. 2023, https://www.naturalgasintel.com/eia-slashes-2023-henry-hub-forecast-as-supply-growth-seen-outpacing-demand/
1. “EIA sees sharp drop in natgas price in 2023” Natural Gas World, 7 Feb. 2023, https://www.naturalgasworld.com/eia-sees-sharp-drop-in-natgas-price-in-2023-103570
2. “US EIA slashes Q1 Henry Hub spot gas price forecast by $1.86, citing weather” S&P Global, 7 Feb. 2023, https://www.spglobal.com/commodityinsights/en/market-insights/latest-news/natural-gas/020723-us-eia-slashes-q1-henry-hub-spot-gas-price-forecast-by-186-citing-weather
3. “U.S. natural gas production in 2023 forecast to hit record high” Xinhua, 7 Feb. 2023, https://english.news.cn/20230208/2666edcc0b1f441ab766cbaee91315a8/c.html
4. “Natural Gas Futures Recover Slightly, but Bearish Headwinds Persist” Natural Gas Intelligence, 7 Feb. 2023, https://www.naturalgasintel.com/natural-gas-futures-recover-slightly-but-bearish-headwinds-persist/
5. “Natural Gas Technical Analysis: Price Amid Negative Expectations” DailyForex.com, 7 Feb. 2023, https://www.dailyforex.com/forex-technical-analysis/2023/02/natural-gas-technical-analysis-7-february-2023/191104
6. “EIA Lowers 2023 Natural Gas Price Outlook By 30%” OilPrice.com, 8 Feb. 2023, https://oilprice.com/Latest-Energy-News/World-News/EIA-Lowers-2023-Natural-Gas-Price-Outlook-By-30.html
7. “Crude oil down $101 per barrel by 2024, EIA says” Land Line Media, 9 Feb. 2023, https://landline.media/eia-forecasts-decline-in-oil-prices-lower-natural-gas-costs/
8. “Natural Gas Prices Tumble, Volatility Spikes Post EIA Outlook” Investing.com, 8 Feb. 2023, https://www.investing.com/analysis/natural-gas-prices-tumble-volatility-spikes-post-eia-outlook-200635115
