U.S. Natural Gas Prices Decline During the First Six Months of 2023 : EIA

The average monthly spot U.S. natural gas price declined between January 2023 and June 2023 by 34 percent, or $1.12 metric million British thermal units, according to a July 24 report from the U.S. Energy Information Administration. The report, based on data from Refinitiv Eikon, attributes the price decrease to a comfortable supply picture due to a number of factors including record production, above seasonal normal temperatures that led to lower gas demand, and higher than average inventories at the end of the winter season. The price of gas on the U.S. benchmark Henry Hub averaged $3.30/MMBtu in January on an inflation adjusted basis and fell to $2.18/MMBtu in June.

U.S. dry natural gas production surpassed demand so far this year and has remained at record high levels, averaging over 101 billion cubic feet per day each month. Moreover, dry natural gas production rose by 7 percent or 6.9 bcfd during the first three months of 2023 compared to the same period in 2022. The increase in U.S. dry natural gas production in recent years has been due to increased drilling activity in the Haynesville region in Louisiana and East Texas and in the Permian region in West Texas and Southeast New Mexico. In these regions, developments in pipeline infrastructure have facilitated the rise in production.

Temperatures during the winter period have essentially been above seasonal normal and as a result, the demand for heating and therefore natural gas consumption has been significantly lower than expected across the U.S. during the first quarter of 2023. U.S. natural gas consumption averaged 103 bcfd between Jan. 1 and April 30, 2023, down 1 bcfd compared to the same period last year, according to the agency. The decline in consumption was due to lower usage in the residential and commercial sectors, where combined consumption declined by 18 percent in January and 12 percent in February, compared to the same periods in 2022.

Despite the downtrend price trend during the first half of the year, the EIA forecast U.S. gas prices to increase from current levels during the second half of this year averaging $2.83/MMBtu. The EIA forecast prices to peak in December at $3.44/MMBtu.