Principal contributor: Max Ober

Data source: U.S. Energy Information Administration, Short-Term Energy Outlook (STEO)

In our November Short-Term Energy Outlook (STEO), we forecast that natural gas spot prices at the U.S. benchmark Henry Hub will average $6.09 per million British thermal units (MMBtu) this winter (November 2022–March 2023), the highest real price since winter 2009–10. Our forecast reflects natural gas storage levels that are 4% below average heading into winter withdrawal season and more demand for liquefied natural gas (LNG) as the Freeport LNG facility comes back online. After the winter, we expect the Henry Hub price to decline in 2023 as production growth outpaces both domestic consumption and LNG exports.

Henry Hub natural gas spot prices reached a peak of $8.80/MMBtu in August. Prices declined to average $5.66/MMBtu in October following a period of strong dry natural gas production and several consecutive weeks of relatively large injections into natural gas storage. Throughout September and October, high volumes of natural gas injections into underground storage reduced the storage deficit to the five-year (2017–21) average from 11% at the end of August to 4% as of October 28.

Despite lower Henry Hub spot prices since August, we expect natural gas prices to rise this winter as a result of seasonal demand for natural gas in space heating, which typically peaks in January and February. We expect that higher demand for LNG exports—particularly in the Northern Hemisphere—will also increase natural gas prices. We expect demand for natural gas at LNG export facilities to increase when the Freeport LNG terminal in Texas resumes partial operations in November, after it paused operations in June following a fire.

U.S. dry natural gas production has been increasing throughout 2022 and has averaged more than 98 billion cubic feet per day (Bcf/d) every month since June. We expect dry natural gas production to continue to grow, averaging 99.4 Bcf/d this winter and 99.7 Bcf/d in 2023. We forecast natural gas prices at the Henry Hub will begin to decline in the spring of 2023 as production growth continues and winter demand for heating subsides. For 2023, we forecast the annual Henry Hub price to average $5.46/MMBtu for the year.