Natural gas
Natural gas prices and storage
The Henry Hub natural gas spot price averaged an inflation-adjusted record-low of $1.72 per million British thermal units (MMBtu) in February. We forecast prices will stay under $2.00/MMBtu in the second quarter of 2024 (2Q24) because we expect natural gas inventories will remain high relative to the five-year average as the United States enters the shoulder season when there is typically less U.S. natural gas consumption than at other times of the year. In our March STEO, the annual average Henry Hub price for all of 2024 averages almost $2.30/MMBtu, 14% lower than in our February STEO.
This winter (November–March) has been mild throughout much of the United States, and the country has experienced 8% fewer heating degree days (HDDs) than the 10-year average. February was much milder than expected, with 9% fewer HDDs than forecast in last month’s STEO. Because of the mild weather, we estimate combined residential and commercial sector consumption of natural gas this winter will be 3 billion cubic feet per day (Bcf/d) which is 9% less than the previous five-year winter average. Reduced natural gas consumption for space heating and increased U.S. dry natural gas production, which we estimate will be about 3 Bcf/d more this winter compared with last winter, have contributed to above-average inventories. We expect U.S. inventories of natural gas will total 2,270 Bcf at the end of the winter heating season on March 31, 37% above the previous five-year (2019–2023) average for March, contributing to historically low natural gas prices and to our expectation of low prices for the next several months.
Natural gas production
We estimate that U.S. dry natural gas production increased to almost 104 Bcf/d in February after declining in January to 102 Bcf/d because of weather-related outages. We expect production to continue to remain near that level in March and then decline slightly through the rest of the year, as some producers have announced production curtailments because of low prices. Dry natural gas production falls to 103 Bcf/d by December 2024 in our forecast and then averages 104 Bcf/d in 2025. We do not expect that natural gas production will return to its December 2023 record of 106 Bcf/d during the forecast period.
Although production declines slightly through the rest of 2024 because of low natural gas prices and a relatively stable rig count, production begins to increase in early 2025, mostly driven by natural gas prices that average almost $3/MMBtu in our forecast next year, as well as increased demand for liquefied natural gas (LNG) exports.
The continued strength in U.S. natural gas production will be key in determining how long the current inventory surplus to the five-year average and low prices persist. Because of low natural gas prices, some producers have announced curtailments in production or reductions in capital expenditures toward natural gas-directed activities in 2024. How soon curtailments affect the market is highly uncertain, and our price forecast is based on relatively high production entering the shoulder season when natural gas demand is lower than other times of the year. However, if there is less production than our forecast, the next few months are warmer than normal, and natural gas consumption for electric power generation increases more than our forecast, then inventories could fall below our forecast and prices could be higher.
Most natural gas production in the United States comes from three regions: the Permian, the Haynesville, and Appalachia. In 2024, most production growth in our forecast comes from the Permian region in Texas and New Mexico, where most natural gas production is associated natural gas from crude oil production. Production in the Haynesville region is mostly flat in 2024 because of low natural gas prices and a relatively low rig counts Haynesville production increases in 2025 because of its proximity to new LNG export facilities. We expect production in the Appalachian Basin to be mostly flat in 2024 as natural gas pipeline capacity constraints restrain production.