The Energy Information Administration (EIA) is saying higher gas demand from the electricity power sector for the rest of this year is expected to bolster natural gas prices nearly 40%. EIA is projecting prices to be around $2.90 per MMBtu (Henry Hub), up from the $2.10 average for the first half of the year. Producers saw prices north of $6.00 in 2022.
A three percent increase in demand in the first half of the year was likewise driven by the electricity power sector. Natural gas has seen more volatility than oil and coal.
Accounting for part of the first half softness is what the agency says was the warmest winter on record. Storage levels remain relatively high at slightly over 3,200 BCF as of July 12. Storage levels are 8% (250 Bcf) higher than last year and 17% (465 Bcf) over the five-year average.
Prospects for higher gas prices for the rest of this year could see added firmness from a lackluster injection season (April through October). Injections since April are 15% lower than their five-year average, the same level of decrease Y-o-Y. Slightly less than a TCF has been injected into storage thus far, according to the report.
The EIA outlined in its Short-Term Energy Outlook (STEO) that it anticipates injections to slow even further before November. They project a continued slowdown as low as 27% less than the five-year average. Should the subnormal projections come to pass, it would tighten inventories to just 6% over the five-year average.
In addition, American producers face growing pressures on gas delivery. The Biden administration, for instance, paused new LNG export terminal permitting earlier this year; the ban was overturned recently in federal court. Further regulatory roadblocks in the form of more consideration for environmental impacts and legal challenges affecting infrastructure like pipelines is adding to producers’ stranded gas challenges.
Nonetheless, the U.S. remains the world’s top natural gas exporter at about 12 bcf a day.
By Jim Felton for oilandgas360.com
