By Editors of Power Engineering
The latest short-term energy outlook from the U.S. Energy Information Administration suggests the Henry Hub natural gas spot price will rise significantly over the next two years.
The predicted 2017 average is $3.55 per million British thermal units, and the 2018 average will be $3.73 MMBtu. The average for 2016 was $2.51 MMBtu.
The higher prices will be due to an increase in natural gas consumption as well as an increase in exports that will exceed both supply and imports.
The New York Mercantile Exchange’s confidence interval range, which is based on trading and not EIA’s supply and demand estimates, ranges from $1.78 MMBtu to $7.2 MMBtu by February 2018.
Last year, natural gas prices from Henry Hub hit the lowest levels since 1999 due to a very mild winter that contributed to high inventory. However, high natural gas use for electricity production and declining production caused prices to rise from $2.00 MMBtu in the first quarter to $2.88 MMBtu in the third quarter.
Additionally, cold weather in much of the northern United States lead to an increase in demand, and the Henry Hub average reached $3.59 MMBtu in December.
As natural gas use largely depends on winter weather, any discrepancy between the EIA’s weather assumptions and the actual weather could significantly affect both consumption and prices. The EIA expects the next two winters to be more typical.
The lower inventory, as well as pipeline infrastructure buildout, is predicted to increase natural gas production. However, exports are expected to increase as well as more liquefied natural gas plants come online.