U.S. natural gas spot prices are expected to rise in the second half of 2023 as E&Ps continue to face a volatile commodity market and operators pull back production, according to new Energy Information Administration (EIA) forecasts.
Henry Hub spot prices could increase to a monthly average of nearly $2.60/MMBtu in July, a 19% increase compared with average gas spot prices seen in June, the EIA reported in its latest Short-Term Energy Outlook published July 11.
The EIA expects Henry Hub gas spot prices to average more than $2.80/MMBtu in the second half of 2023, up from around $2.40/MMBtu during the first half of the year.
“U.S. dry natural gas production has been relatively flat in recent months, a production trend we expect to generally continue for the rest of this year,” the EIA said in its report. “With flat production and year-over-year growth in natural gas consumption, we expect U.S. natural gas inventories will reduce the surplus to the five-year average, which will put upward pressure on prices.”
Gas producers saw prices rise above $9/MMBtu in the summer of 2022 but have since faced an oversupply in the market, weakened demand and higher-than-expected levels of gas storage.
Henry Hub prices are expected to average $2.62/MMBtu during 2023—down almost 60% from an average of $6.42/MMBtu in 2022.
As E&Ps continue to weather a period of low prices, growth in gas production is expected to slow in basins across the Lower 48 this month, the EIA laid out in a June forecast.
Natural gas output from Appalachia—the top gas-producing region in the Lower 48—grew by around 72.5 million cubic feet per day (MMcf/d) month-over-month from May to June, but is expected to rise by only 25 MMcf/d from June to July, per EIA figures.
The forecast has Haynesville Shale gas production growing by about 4 MMcf/d to a record 16.645 Bcf/d in July. But production in the gassy basin had grown by nearly 75 MMcf/d in the previous month.
Oil producers in the Permian Basin are also dealing with increasing volumes of associated gas from oil wells as the prolific play matures.
Oil prices rise gradually
The EIA anticipates crude oil prices rising gradually in the coming months and into 2024 as global crude inventories decline.
Brent crude prices will average $78/bbl in July, up from an average of $75/bbl over the past two months.
Rising crude demand and the effects of production cuts by Saudi Arabia and the OPEC+ cartel are expected to provide a lift to oil prices, the EIA said. Brent spot prices are forecast to rise to $81/bbl by the end of the year and average $84/bbl in 2024.
U.S. crude prices aren’t expected to see much of a lift—West Texas Intermediate spot prices will average around $74/bbl in the back half of 2023, roughly flat from the first half of the year.
WTI spot prices should rise to average around $78.51/bbl in 2024, per EIA figures.
2023-07-18 - Oil and gas production is slated to fall in regions across the nation in August, including the Permian Basin, according to new EIA figures.
2023-09-13 - The extension of OPEC+ and Saudi Arabia production cuts are predicted to make oil and gasoline more expensive.
2023-08-08 - Brent crude futures rose to $86.17 a barrel, while West Texas Intermediate crude rose to $82.92.
2023-09-01 - U.S. field production of crude oil rose 1.6% in June to 12.844 MMbbl/d, the highest since February 2020, before the coronavirus pandemic destroyed demand for fuel and other oil products, the Energy Information Administration said on Aug. 31.
2023-07-31 - Both Brent and WTI are on track to close July with their biggest monthly gains since January 2022.