The United States Energy Information Administration (EIA) expects natural gas prices at the Henry Hub to average around $3.40 per million British thermal units in 2023, 47% lower than in 2022. According to EIA’s February "Short-Term Energy Outlook" (STEO), a warmer-than-normal start to the year has reduced natural gas consumption to below average.
“U.S. natural gas inventories fell by less than our expectations in January because of the warmer-than-average weather. With more natural gas in inventory, we reduced our forecast for natural gas prices over the coming year,” said EIA Administrator Joe DeCarolis. “There is still a lot of uncertainty, including the possibility of extreme weather later this winter that could increase demand and temporarily slow down production, but those possibilities decrease as we approach spring.”
Increased natural gas production and less demand has allowed U.S. natural gas inventories to rise after a period of below-average levels. EIA expects natural gas inventories to remain above average through the summer. Other key takeaways from the February 2023 STEO forecast include:
- “We expect about 4% less energy-related carbon dioxide emissions in 2023, which is driven largely by a 15% decrease in emissions from coal this year,” DeCarolis said. EIA expects U.S. electricity generation to decrease 2% in 2023, with even larger reductions in coal-fired generation. Less electricity generation largely stems from reductions in consumption in the residential and industrial sectors.
- EIA expects that U.S. coal exports will increase by about 2% in 2023 and 9% in 2024, largely to supply growing demand in Europe and Asia. Europe has been using more coal for electricity generation as the region looks to limit its consumption of natural gas from Russia. “Even as global demand for coal is growing, we expect that reduced U.S. demand will lead to less coal production in the United States this year and in 2024,” DeCarolis said.
- Russia and China remain sources of uncertainty in EIA’s STEO forecasts. Global demand for jet fuel has increased as China’s economy has opened up following pandemic lockdowns. Russia’s crude oil exports have largely gone unchanged since the European Union instituted a ban on seaborne crude oil imports from Russia. “We continue to monitor developments in Russia and China because of their impact on the global energy sector,” DeCarolis said.
The full February 2023 STEO is available on the EIA website and includes EIA’s forecasts for 2024. EIA will further explore drivers of uncertainty in natural gas market forecasts in an upcoming supplement to the STEO, scheduled for release on Feb. 9.
