Pandemic-related demand swings and the push toward renewables have fueled natural gas price volatility.
Why is the price of natural gas rising?
“The price of natural gas is significantly higher this winter than it was at this time last year due to an increase in global demand and extreme weather in gas-producing states that created supply constraints at the same time,” Ress told MassLive. “After hitting 10-year lows during the COVID-19 pandemic, the price of natural gas is significantly higher this winter than it was at this time last year due to an increase in global demand and extreme weather in gas-producing states that created supply constraints at the same time.”
Will natural gas prices continue to rise?
Natural gas prices are expected to continue near $4/MMBtu in 2022 and 2023, according to the EIA – Today in Energy – US Energy Information Administration (EIA)
Is it likely that natural gas prices will rise in 2022?
According to our newest Short-Term Energy Outlook, we expect marketed natural gas production in the United States to climb to an average of 104.4 billion cubic feet per day (Bcf/d) in 2022 and then to a record-high 106.6 Bcf/d in 2023. (STEO). Over the next two years, the Lower 48 states (L48), excluding the Federal Offshore Gulf of Mexico, will account for almost 97 percent of output (GOM). The remaining 3% will come from Alaska and the Gulf of Mexico.
The wholesale spot price of natural gas at the U.S. benchmark Henry Hub will average $3.92 per million British thermal units (MMBtu) in 2022, an eight-year high, and $3.60/MMBtu throughout 2023, according to our estimates. We foresee ongoing increases in drilling activity and natural gas production in the United States as a result of these high prices.
Legacy production in the L48 is expected to average 83.2 Bcf/d in 2022 and reduce 21% to 65.9 Bcf/d in 2023, according to our prediction. In 2022, new well production will add 18.1 Bcf/d, rising to 37.8 Bcf/d in 2023, balancing diminishing legacy well production and increasing total L48 marketed gas production to 103.7 Bcf/d in 2023.
The Appalachia region in the Northeast, the Permian region in western Texas and southeastern New Mexico, and the Haynesville region in Texas and Louisiana will all contribute to increased natural gas production in the United States.
According to our STEO prediction, Haynesville output will increase by 1.6 Bcf/d yearly on average during the next two years. Drilling in the Haynesville region remains cost-effective, even with deeper and more expensive well development, as long as natural gas prices remain high. Haynesville also attracts operators due to its higher well productivity and closeness to liquefied natural gas export ports and significant industrial natural gas customers along the US Gulf Coast.
The Permian region is expected to add 2.2 Bcf/d to production increase in 2022 and 1.2 Bcf/d in 2023, according to our estimates. Our projection for the West Texas Intermediate crude oil price stays over $60 per barrel, prompting operators to ramp up oil-directed drilling in the region, resulting in increased associated gas output.
In recent years, the Appalachia region has contributed the most to domestic natural gas production in the United States, contributing about one-third of L48 output annually since 2016. Despite the fact that production growth has slowed in recent years due to reduced drilling activity and emerging pipeline capacity constraints, Appalachia well-level productivity has increased, partially offsetting the drilling reduction. Production in the Appalachia region is expected to increase by 0.3 Bcf/d in 2022 and 0.7 Bcf/d in 2023, according to our estimates.
Why is natural gas becoming more expensive?
Meanwhile, natural gas prices are still somewhat higher than they were a year ago, though they have dropped significantly in recent weeks.
Natural gas touched $6.47 per million British thermal units in early October, as fears of a European-style scarcity grew. It was the highest since February of 2014.
That rally, however, has completely reversed. On Monday, natural gas plunged 11.5 percent to $3.66 per million BTU, its lowest level since January 2019. It’s the lowest it’s been since July 15th.
The fact that temperatures have been higher than average in the United States has contributed to natural gas prices falling. As a result, demand for natural gas, the most common form of home heating, has decreased.
“The warmer-than-normal start to winter has allayed fears,” said Christopher Louney, RBC Capital Markets’ vice president of global commodity strategy.
Will the price of natural gas drop?
In its natural gas prediction released on March 8, the EIA predicted that Henry Hub’s spot price will average $3.95/MMBtu in 2022, down from $4.06/MMBtu in 2021. On predicted increasing output, it could decline to $3.59/MMBtu in 2023. It predicted that US natural gas output would average 96.7 billion cubic feet per day in 2022, up 3.1 billion cubic feet per day from 2021, and rise to 99.1 billion cubic feet per day in 2023.
BofA anticipated that Henry Hub may trade at an average of $4.10/MMBtu in 2022, based on production growth of 4 bcfd year over year, in its natural gas pricing outlook released on March 25. In 2023, the price is scheduled to decline to $3.40 per MMBtu.
Trading Economics predicted Henry Hub would trade at $5.81 by the end of the quarter and $6.70 within a year as of March 31.
Henry Hub is expected to trade at an average of $4.10/MMBtu in 2022 and $3.40 in 2023, according to BofA. Analysts did not provide a pricing projection for the Henry Hub in 2030.
What will the price of gasoline be in 2024?
According to our econometric models, long-term US gasoline prices are expected to trend at 1.38 USD/Liter in 2023 and 1.46 USD/Liter in 2024.
Will the price of gasoline rise in 2023?
Researchers indicated that countries other than the United States could block Russian energy imports or declare new sanctions as one of the significant developments that could effect oil prices in the future. According to them, corporate actions could have an impact on Russia’s oil production.
Meanwhile, according to the agency, non-Russian manufacturers may raise output in reaction to rising pricing.
“We have continuously forecasted that global output of energy commodities such as crude oil will increase this year to match demand, which has expanded more rapidly since mid-2020,” according to EIA experts. “This is still something we expect.
“In 2022, we project global oil production to rise to the point where it may begin to replenish depleted world inventories, resulting in some crude oil price decreases. However, given Russia’s actions in Ukraine and the international response, these projections are highly speculative.”
Between 2Q2022 and the end of 2023, global oil inventories are expected to expand by 0.5 million b/d on average, according to the latest STEO. This pricing reflects lower Russian oil production.
“However, if production disruptions in Russia or elsewhere are more than expected, crude oil prices will rise faster than expected, according to the experts.
In February, Russia produced an estimated 11.3 million barrels per day. According to STEO forecasts, the country’s output will drop by 0.25 million b/d in March and another 0.5 million b/d in April.
According to the EIA, Brent spot prices averaged $97 in February, up $11 from the previous month. That was before the events in Ukraine pushed prices up to roughly $124 in the first week of March, destabilizing an already volatile global market “Despite low inventories, there are “continuous upward oil price pressures.”
Overall, global petroleum and liquid fuels consumption is expected to reach 100.6 million b/d in 2022, up 3.1 million b/d year over year. According to the EIA, consumption will average 102.6 million b/d in 2023. The economic forecasting utilized in the projection, according to the researchers, foreshadowed the recent events in Ukraine.
“How economic activity and travel respond to current and probable future events and penalties will determine oil consumption,” they stated.
Is U.S. Natural Gas Production to Rise?
Meanwhile, the EIA predicts that Henry Hub spot prices would average $3.95 in 2022 before falling to $3.59 in 2023. In February, Henry Hub averaged $4.69, up from $4.38 in January, as inventory draws above the five-year average for the month.
Following supply disruptions in February, the agency anticipates production to increase sequentially in March, putting downward pressure on natural gas prices.
In February, dry natural gas production in the United States was 95.3 Bcf/d, down 0.6 Bcf/d from January. Production is predicted to reach 95.7 Bcf/d in March, and 96.7 Bcf/d for the entire year of 2022. According to analysts, production will rise to 99.1 Bcf/d on average in 2023.
Domestic natural gas stockpiles were 1.6 Tcf at the end of February, and the EIA expected a carryout of roughly 1.5 Tcf by the end of March, which would be 10% lower than the five-year average. According to the latest STEO, inventories are on track to conclude October at 3.5 Tcf, which is 4% lower than the five-year average.
Domestic consumption is expected to average 84.6 Bcf/d this year, up 2% from 2021, owing to higher industrial demand due to increasing manufacturing activity, as well as cooler temperatures year over year causing an increase in residential/commercial demand. According to the STEO, increased renewable energy generation should cut natural gas demand in the electric sector this year.
Liquefied natural gas (LNG) exports in the United States averaged 10.9 Bcf/d in February, down from 11.2 Bcf/d in January, according to the EIA.
“Like last year, fog in the Gulf of Mexico limited U.S. LNG exports in February, causing vessel traffic to be disrupted and piloting services to be discontinued for several days on the Sabine Pass, Lake Charles, and Corpus Christi waterways,” researchers stated.
According to the EIA, US LNG exports are expected to average 11.3 Bcf/d in 2022, up 16 percent year over year.
In 2022, what will the price of gasoline be?
According to GasBuddy’s 2022 fuel forecast, the average cost of a gallon of gas would reach $4.25 in May, a number that has already been reached as of Wednesday morning.
Despite the fact that costs are likely to fall after May, the average is expected to stay above $4 until November. In 2022, the average is predicted to be $3.99. Due to the situation in Ukraine, De Haan told CNN on Tuesday that the national average might approach $5 per gallon.
“It’s a bad scenario that isn’t going to get any better any time soon. The high prices are likely to last months rather than days or weeks, like they did in 2008. According to GasBuddy, the annual national average is currently expected to reach its highest level ever “According to a press release issued by De Haan on Monday.
President Joe Biden imposed an embargo on all Russian energy items being imported into the United States on Tuesday, including imports of Russian crude oil, certain petroleum products, liquefied natural gas, and coal. The choice, according to experts, will contribute to the cost hike.
“You’re going to see prices undoubtedly go up in the short future,” energy analyst Gianna Bern said. “How much, and where and how the void is filled, remains to be seen.”
How much longer will natural gas be available?
According to the US Energy Information Administration’s Annual Energy Outlook 2022, there were approximately 2,926 trillion cubic feet (Tcf) of technically recoverable resources (TRR) of dry natural gas in the United States as of January 1, 2020. If dry natural gas output in the United States remains constant at around 30 Tcf in 2020, the country will have enough dry natural gas to last roughly 98 years. The length of time the TRR will last is determined by the amount of dry natural gas produced and future changes in natural gas TRR.
Proven reserves and unproven resources are included in technically recoverable reserves. The projected amounts predicted to be produced with reasonable certainty under current economic and operating conditions are known as proved reserves of crude oil and natural gas. Unproved crude oil and natural gas resources are amounts that are anticipated to be theoretically recoverable without regard to economics or operating circumstances, based on current technology. According to the EIA, the United States had 464 Tcf of proved reserves and 2,460 Tcf of unproved reserves of dry natural gas as of January 1, 2020.
TRR estimates are very speculative, especially in areas where few wells have been drilled. As new geological knowledge is gathered through more drilling, long-term productivity for existing wells is clarified, and the productivity of new wells grows with technical advances and better management techniques, early projections tend to change and shift dramatically over time. TRR projections for each Annual Energy Outlook are based on the most recent well production statistics as well as information from other federal and state government agencies, industry, and academia.
Table 2 shows the technically recoverable dry natural gas resources in the United States as of January 1, 2022.
Reference case forecasts for annual dry natural gas output in the United States out to 2050 in the Annual Energy Outlook.
Other FAQs about Natural Gas
- Does the EIA provide state-by-state estimates or projections for energy output, consumption, and prices?
- Is the EIA aware of any unplanned disruptions or shutdowns of energy infrastructure in the United States?
- Is the EIA able to provide data on energy use and prices for cities, counties, or zip codes?
- In the Weekly Natural Gas Storage Report, how does EIA determine the year-ago and five-year averages?
- A kilowatthour of electricity is generated using how much coal, natural gas, or petroleum?
- How much does it cost to produce electricity using various power plants?
- How much of the carbon dioxide produced in the United States is due to power generation?
- What are the differences between Ccf, Mcf, Btu, and therms? What is the best way to convert natural gas costs from dollars per Ccf or Mcf to dollars per Btu or therm?
- Why am I paying more for heating oil or propane than what is listed on the EIA website?
Is natural gas a worthwhile investment?
Is it wise to invest in natural gas? Due to oversupply and fluctuating pricing, natural gas investment has been difficult in recent years. Demand for the cleaner fuel, on the other hand, is expected to increase in the future years, benefiting natural gas supplies. As a result, it could be a sound long-term investment.