Rising natural gas production will lead to lower prices for consumers this winter, AGA says

After a summer in which massive production helped ease the balance between supply and demand, U.S. natural gas consumers are expected to see lower and more stable prices this winter, according to the American Gas Association (AGA).

In its Winter Heating Outlook 2023, published on Monday, the AGA said home heating prices are expected to fall by an average of 21% annually between 2022 and 2023. The decline is the result of an expected 45% annual decline in wholesale prices. at Henry Hub, the benchmark for the US natural gas market.

NGI data shows Henry Hub prices average $2,765 Offer week of October 2023which was a sharp drop from last October’s bidweek average of $5,460. Henry Hub while cash prices averaged $3,170 on Monday forward prices show Henry Hub averaged $3,382 per winter strip from November to March.

(Want to imagine the prices of Henry Hub, Houston Ship Channel and Chicago Citygate? Check out NGI’s daily natural gas price overview now.)

AGA’s winter cost analysis showed that households can save 34% to 72% by using natural gas for heating compared to many electricity alternatives. Homes and businesses that already use natural gas for space heating can further reduce costs by 17% this winter by installing a high-efficiency gas furnace.

“We’re seeing prices that are stable and consistent with recent historical trends,” said AGA’s Richard Meyer, vice president of energy markets, analysis and standards. “The return to lower prices means natural gas bills are expected to drop this winter – even in colder conditions.”

Early indications from the National Oceanic and Atmospheric Administration point to the likelihood of above-average temperatures covering much of the northern United States through March. This should reduce heating demand in these regions this winter. However, forecasts show equal chances of below average or above average temperatures for most southern states, including Texas. Southern California was also threatened with colder weather.

Growing supply of NatGas

The core of the outlook for lower consumer prices is the growing production of natural gas, which not only exceeded demand throughout the year, but should continue to grow in the coming months. Citing data from the U.S. Energy Information Administration (EIA), AGA said supply will exceed demand by 1 Bcf/d in 2023 and 0.5 Bcf/d in 2024.

The projected power increase comes alongside an expected increase in natural gas for electricity generation and peak demand. The EIA said electricity generation from natural gas hit a record high last winter at more than 120 billion KWh, with consumption expected to rise another 1.3% during the 2023-2024 winter. However, the AGA noted that higher coal supplies may help avoid gas-to-coal restrictions this year.

At the same time, demand for LNG is expected to increase slightly year on year. This is largely due to the Freeport LNG export terminal return to service after a long break. EIA estimates that LNG demand will average 12.2 Bcf/d this winter, up 10% year-over-year.

Despite the increase in forecast demand, AGA noted that strong production growth has dramatically improved the storage situation heading into this winter. EIA data shows that every region of the United States enters the peak demand season with above-average inventory levels. Total working gas in storage in the Lower 48 it was 3,700 Bcf as of October 20, which is 313 Bcf more year-over-year and 183 Bcf above the five-year average.

“This outlook is in stark contrast to last year’s sharp decline in natural gas production, which contributed to a tight call for system integrity in the New York area during winter storm Elliott, where record demand and operational problems forced some gas companies to rely on on contingency plans to ensure customer reliability,” AGA said.

While the final report of federal regulators on Winter Storm Elliott looming, recommendations to ensure the reliability of natural gas and electricity suppliers are likely, according to the AGA. The organization, which represents more than 200 local utilities, expects to work with the Federal Energy Regulatory Commission “to ensure that it takes steps within its jurisdiction to maintain reliable pipeline and storage services for gas delivery.”

AGA’s consumer spending analysis is similar to others published before this winter.

In his October Short-term energy outlookThe EIA stated that households heating with natural gas should pay about 20% less for fuel in the upcoming heating season.

In September, the National Energy Assistance Directors Association said the average cost of natural gas would be higher this winter a decrease of 7.8% per year to $726.

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