The U.S. Energy Information Administration (EIA) has recently revised its forecast for Henry Hub natural gas prices, anticipating an average price of $2.19 per million British thermal units (MMBtu) in 2024 and $2.95 per MMBtu in 2025. This marks an increase from the previous projections in November, which had estimated prices at $2.17 per MMBtu for 2024 and $2.90 per MMBtu for 2025. For the fourth quarter of 2023, the EIA expects a Henry Hub spot price of $2.45 per MMBtu, rising to $2.95 per MMBtu in early 2024, with subsequent increases throughout the year.
The EIA attributed the recent decline in natural gas prices in November to mild autumn weather and the U.S. entering the winter heating season with six percent more natural gas in storage compared to the previous five-year average. Despite a brief dip in spot prices, the EIA forecasts that the Henry Hub spot price will average $3.00 per MMBtu for the remainder of the winter heating season, with expectations to maintain prices just under $3.00 per MMBtu through 2025.
Looking ahead, the EIA also projects that U.S. natural gas inventories will remain above the five-year average throughout the winter. However, it anticipates a drop of about 590 billion cubic feet (Bcf) in December, which is 34 percent higher than the typical withdrawal rate. Mild weather in the first quarter of 2025 may limit the expected withdrawals, with inventories predicted to end March 2025 at 1,920 Bcf, slightly above the five-year average.
U.S. dry natural gas production is expected to stay steady at around 103 billion cubic feet per day (Bcfpd) in the first quarter of 2025, with a one percent increase projected for the year. This growth is primarily driven by increased production in the Permian and Eagle Ford regions, as well as higher demand for natural gas due to new liquefied natural gas (LNG) export projects in the Haynesville region.
LNG exports are also set to rise, with the EIA forecasting nearly 12 Bcfpd in 2024, flat compared to last year, but expecting a 15 percent increase in 2025. This growth is attributed to the expansion of export capacity, with new projects like Plaquemines LNG and Corpus Christi LNG Stage 3 set to start exports by December 2024.
Market analysts, such as J.P. Morgan and Fitch Group, have offered their own projections, with J.P. Morgan predicting a higher average price for 2025 at $3.50 per MMBtu and expecting a further rise in 2026. Similarly, BMI forecasts prices of $2.40 per MMBtu in 2024 and $3.40 per MMBtu in 2025, while Standard Chartered Bank anticipates an average of $3.25 per MMBtu for 2025.
These various forecasts suggest a generally positive outlook for natural gas prices over the next few years, driven by factors such as increased LNG exports, stable production levels, and potential shifts in seasonal weather patterns.
Diversified Energy Company plc (LON:DEC) is an independent energy company engaged in the production, marketing, transportation and retirement of primarily natural gas and natural gas liquids related to its U.S. onshore upstream and midstream assets.
