Prices fell largely because the outage at Freeport LNG decreased US natural gas exports (a factor in US natural gas demand), putting downward pressure on natural gas prices. In the EIA's July Short-Term Energy Outlook (STEO), it was estimated that US LNG exports averaged 10.1 billion ft3/d in June, a 1.5 billion ft3/d decline from May, as a result of the outage. It is expected that US LNG exports will remain below average, at 10.5 billion ft3/d in 2H22, which is 1.8 billion ft3/d lower than in our June STEO forecast.
It is expected that the Henry Hub natural gas spot price will continue to decline from its June average of US$7.70/million Btu to an average of US$5.97/million Btu in 2H22. We expect a price decline mainly because fewer US LNG exports will likely contribute to a lower overall US natural gas demand outlook.
Amid lower natural gas prices, we forecast natural gas consumption in the industrial sector and electric power sector to rise, offsetting some of the drop in total demand. It is expected that total demand (consumption plus exports) will be down by 0.7 billion ft3/d in 2H22.
By the spring of 2023, US natural gas production is forecast to increase and inventories will build back to their five-year (2017 – 2022) average levels, putting additional downward pressure on prices. The July STEO forecasts the 2023 Henry Hub spot price will average US$4.76/million Btu.
