Natural Gas

• In September, the Henry Hub natural gas spot price averaged $1.92 per million British thermal units (MMBtu), down from an average of $2.30/MMBtu in August. Lower natural gas spot prices reflected declining demand for natural gas from the U.S. electric power sector as a result of cooler-than-normal temperatures during the second half of September and relatively low demand for U.S. liquefied natural gas (LNG) exports amid hurricane-related activity in the Gulf of Mexico. EIA expects that rising domestic demand for natural gas and demand for LNG exports heading into winter, combined with reduced production, will cause Henry Hub spot prices to rise to a monthly average of $3.38/MMBtu in January 2021. EIA expects that monthly average spot prices will remain higher than $3.00/MMBtu throughout 2021, averaging $3.13/MMBtu for the year, up from a forecast average of $2.07/MMBtu in 2020.

• EIA estimates that total U.S. working natural gas in storage ended September at more than 3.8 trillion cubic feet (Tcf), 12% more than the five-year (2015–19) average. In the forecast, EIA expects inventories to be more than 4.0 Tcf on October 31, which would be a record high. However, because expected natural gas production will be lower this winter than last winter, EIA forecasts inventory draws will outpace the five-year average during the heating season and end March 2021 at 1.7 Tcf, which would be 6% lower than the 2016–20 average.

• EIA expects that total U.S. consumption of natural gas will average 83.7 billion cubic feet per day (Bcf/d) in 2020, down 1.8% from 2019. The decline in total U.S. consumption reflects less heating demand in early 2020, contributing to residential and commercial demand in 2020 averaging 13.1 Bcf/d (down 0.7 Bcf/d from 2019) and 8.7 Bcf/d (down 0.9 Bcf/d from 2019), respectively. EIA forecasts industrial consumption will average 22.3 Bcf/d in 2020, down 0.8 Bcf/d from 2019 as a result of reduced manufacturing activity. EIA expects total U.S. natural gas consumption will average 78.7 Bcf/d in 2021, a 5.9% decline from 2020. The expected decline in 2021 is the result of rising natural gas prices that will reduce demand for natural gas in the electric power sector.

• EIA forecasts U.S. dry natural gas production will average 90.6 Bcf/d in 2020, down from an average of 93.1 Bcf/d in 2019. In the forecast, monthly average production falls from a record 97.0 Bcf/d in December 2019 to 85.9 Bcf/d in May 2021, before increasing slightly. Natural gas production declines the most in the Permian region, where EIA expects low crude oil prices will reduce associated natural gas output from oil-directed rigs. EIA’s forecast of dry natural gas production in the United States averages 86.8 Bcf/d in 2021. EIA expects production to begin rising in the second quarter of 2021 in response to higher natural gas and crude oil prices.

• EIA estimates that U.S. LNG exports averaged 4.9 Bcf/d in September, an increase of 1.2 Bcf/d from August. Higher global forward prices indicate improving netbacks for buyers of U.S. LNG in European and Asian markets for the upcoming fall and winter seasons. The increased prices come amid expectations of natural gas demand recovery and potential LNG supply reductions because of maintenance at the Gorgon LNG plant in Australia. EIA forecasts that U.S. LNG exports will return to pre-COVID levels by November 2020 and will average more than 9.0 Bcf/d from December 2020 through February 2021.