EIA forecasts lower wholesale U.S. natural gas prices in 2023 and 2024

In our January Short-Term Energy Outlook (STEO), we forecast the natural gas spot price at the U.S. benchmark Henry Hub will average $4.90 per million British thermal units (MMBtu) in 2023, more than $1.50/MMBtu lower than the 2022 average. We expect prices to stay nearly the same in 2024 as dry natural gas production continues to grow in the United States and outpaces domestic natural gas demand and exports for most of the year.

We forecast the Henry Hub price will average close to $5.00/MMBtu in the first quarter of 2023; both winter weather and liquefied natural gas (LNG) exports at near-capacity volumes will lead to greater natural gas demand, which will result in higher prices in the United States. After a warm start to January, we expect colder winter weather to return, prompting higher natural gas consumption for space heating in the residential and commercial sectors, which causes prices to rise. We also expect the Freeport LNG export facility in South Texas, which shut down in June due to a fire, to resume operations in the first quarter of the year. Resuming export shipments from Freeport LNG will add approximately 2 billion cubic feet per day (Bcf/d) to overall U.S. natural gas demand, which also contributes to higher first-quarter prices.

We expect natural gas prices to decline in the second quarter of 2023, then stay relatively flat for the rest of the year as a result of:

• Winter weather subsiding, reducing domestic consumption
• U.S. LNG exports remaining flat once Freeport LNG comes back online
• Dry natural gas production continuing to rise

We expect U.S. natural gas production to increase by about 2% in 2023, averaging between 100 Bcf/d and 101 Bcf/d for the year. We expect natural gas consumption to decline in the electric power sector as more renewable electric-generating capacity comes online and overall electricity consumption declines as a result of cooler summer weather than last year. No new U.S. LNG export facilities are planned to come online in 2023; without new facilities, U.S. LNG exports will not increase.

In the first quarter of 2024, we expect natural gas prices to increase, then drop below 2023 prices. In 2024, additional increases in dry natural gas production, which will outpace higher LNG exports and slightly lower domestic consumption than in 2023, will put downward pressure on natural gas prices. We expect dry natural gas production to average more than 102 Bcf/d in 2024. Domestic natural gas consumption will likely decline further, but rising U.S. LNG exports will partially offset the reduced consumption. We forecast that average monthly U.S. LNG exports will surpass 13 Bcf/d by the end of 2024 and continue growing in 2025 as new export facility projects increase overall U.S. LNG export capacity.

Principal contributor: Max Ober