Story by Andreas Exarheas| RigZone.com | The U.S. Energy Information Administration (EIA) has revealed its latest Henry Hub natural gas spot price forecast for 2024 and 2025 in its November short-term energy outlook (STEO), which was released recently.
According to its latest STEO, the EIA now sees the Henry Hub spot price averaging $2.17 per million British thermal units (MMBtu) this year and $2.90 per MMBtu next year. In its previous STEO, the EIA projected that the Henry Hub spot price would average $2.28 per MMBtu in 2024 and $3.06 per MMBtu in 2025.
In its November STEO, the EIA forecast that the commodity would be $2.37 per MMBtu in the fourth quarter of 2024, $2.84 per MMBtu in the first quarter of 2025, $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.
In its October STEO, the EIA projected that the Henry Hub spot price would average $2.81 per MMBtu in the fourth quarter of 2024, $3.16 per MMBtu in the first quarter of 2025, $2.59 per MMBtu in the second quarter, $3.13 per MMBtu in the third quarter, and $3.35 per MMBtu in the fourth quarter.
“U.S. natural gas prices fell in October as natural gas consumption declined from September, production remained relatively unchanged, and storage inventories ended the month six percent above the five-year (2019–2023) average,” the EIA said in its latest STEO.
“The U.S. benchmark Henry Hub natural gas spot price averaged $2.20 per MMBtu in October, four percent lower than the September average of $2.28 per MMBtu,” it added.
In the November STEO, the EIA outlined that October’s natural gas demand drop was “led by a 14 percent (six billion cubic feet per day) decline in consumption in the electric power sector, offsetting an increase in consumption in the residential and commercial sectors”.
“Even though consumption in the electric power sector was down month over month in October, it was 13 percent higher than the month’s five-year average,” the EIA stated.
The organization said in the STEO that high power sector demand for natural gas reflected lower natural gas prices and higher air-conditioning use in parts of the United States experiencing extended summer-like conditions.
“We expect the Henry Hub price to rise in the next three months and to average more than $2.80 per MMBtu in the first quarter of 2025,” the EIA highlighted in the November STEO.
“We expect prices to average $2.90 per MMBtu for all of 2025, or 33 percent higher than the 2024 average of $2.20 per MMBtu, mainly because of increased liquefied natural gas (LNG) exports,” it added.
“Our forecast includes LNG exports increasing by nearly two billion cubic feet per day next year with continued strong international demand for LNG as export capacity expands,” it continued.
41% Year on Year Growth Projection
A BMI report sent to Rigzone by the Fitch Group this morning showed that BMI expects the Henry Hub price to average $2.4 per MMBtu in 2024, $3.4 per MMBtu in 2025, $3.8 per MMBtu across 2026 and 2027, and $4.0 per MMBtu in 2028.
A Bloomberg Consensus included in that report projected that the commodity will average $2.4 per MMBtu this year, $3.4 per MMBtu next year, $3.7 per MMBtu in 2026, $3.8 per MMBtu in 2027, and $4.0 per MMBtu in 2028.
“We maintain our Henry Hub price forecast this quarter, expecting a substantial, 41 percent year on year growth in average prices to $3.4 MMBtu in 2025, from $2.4 MMBtu in 2024,” BMI analysts stated in the report.
“This growth will be primarily driven by growing demand for natural gas from the U.S. LNG sector, as we anticipate three new terminals to commence operations between now and the end of 2025,” they added.
“We also expect weaker net gas imports from Canada which will further tighten the U.S. market,” they continued.
In the report, the analysts warned that accelerating natural gas production growth in the United States will weaken the upside.
“That said, we recognize growing downside risks to the 2025 price forecast stemming from downside risks to the domestic and Mexican natural gas demand and upside risks to natural gas production stemming from improved sentiment in the U.S. upstream market in the light of the election victory of the former President Donald Trump,” the analysts noted.
“His policies could also impact our forecasts beyond 2025, raising risks to our view,” they added.
In a research note sent to Rigzone last Friday by the JPM Commodities Research team, J.P. Morgan projected that the U.S. natural gas Henry Hub price will average $2.37 per MMBtu in 2024 and $3.50 per MMBtu in 2025.
The company sees the commodity averaging $2.75 per MMBtu in the fourth quarter of 2024, $3.55 per MMBtu in the first quarter of 2025, $3.10 per MMBtu in the second quarter, $3.55 per MMBtu in the third quarter, and $3.80 per MMBtu in the fourth quarter, the note highlighted.
A report sent to Rigzone last Tuesday by Standard Chartered Bank Commodities Research Head Paul Horsnell showed that the company expects the nearby future NYMEX basis Henry Hub price to average $3.20 per MMBtu in the first quarter of 2025, $3.50 per MMBtu across the second and third quarters, $2.80 per MMBtu in the fourth quarter, and $3.25 per MMBtu overall next year.
Main NatGas Theme? Storage
In an exclusive interview with Rigzone, Frederick J. Lawrence, the ex-Independent Petroleum Association of America (IPAA) Chief Economist, said storage was the main natural gas theme by last week’s end but highlighted that “there are some encouraging demand signals related to demand, weather, and LNG”.
“Natural gas prices dropped toward the end of last week following a bearish EIA storage report that showed a 42 billion cubic foot net increase for the week ending November 8,” Lawrence told Rigzone, noting that storage is relatively comfortable at this point in the year after a spate of warmer than normal weather across most of the United States.
“As per the EIA report, natural gas storage was 158 billion cubic feet higher than last year at this time and 228 billion cubic feet above the five-year average,” he added.
Lawrence highlighted to Rigzone that the EIA natural gas weekly report for the week ending November 13 “showed that gas demand was up 4.9 percent last week with residential and commercial demand rising 23.8 percent compared to the previous week”.
The ex-IPAA Chief Economist also noted that the EIA natural gas weekly report showed that natural gas exports rose 1.4 billion cubic feet per day.
“Higher international gas prices resulted from colder weather in Northeast Asia and Europe in addition to supply risk related to Russian gas flows to Austria,” Lawrence highlighted.
Lawrence also told Rigzone that, in the U.S. market, “some of the election-related impact on certain commodities and equity segments faded by the end of the week with the market more concerned with caution on future interest rate action”.
In a separate exclusive interview with Rigzone, Jim Krane, a Research Fellow at Rice University’s Baker Institute, said traders were surprised last week when more gas was in storage than expected.
“As the Permian oil production gets gassier over time, we may get more such surprises,” Krane warned.
Original Story HERE. To contact the author, email andreas.exarheas@rigzone.com
