Natural gas
Natural gas production
We estimate U.S. dry natural gas production set a monthly record in April of 104 billion cubic feet per day (Bcf/d), up from 102 Bcf/d in March. The production record occurred despite natural gas prices that averaged below $2.50 per million British thermal units (MMBtu) at the U.S. benchmark Henry Hub in March and April, about $4.00/MMBtu less than the 2022 annual average. Production growth has been concentrated in two regions: the Haynesville region in northeastern Texas and northwestern Louisiana, and the Permian Basin in western Texas and southeastern New Mexico. Growth in the Haynesville region reflects the lagged effects of high natural gas prices in 2022 that increased drilling activity in the region. Growth in natural gas production in the Permian, which is mostly associated natural gas, has been driven by relatively high oil prices and increased oil production.
Natural gas
Natural gas production We estimate U.S. dry natural gas production set a monthly record in April of 104 billion cubic feet per day (Bcf/d), up from 102 Bcf/d in March. The production record occurred despite natural gas prices that averaged below $2.50 per million British thermal units (MMBtu) at the U.S. benchmark Henry Hub in March and April, about $4.00/MMBtu less than the 2022 annual average. Production growth has been concentrated in two regions: the Haynesville region in northeastern Texas and northwestern Louisiana, and the Permian Basin in western Texas and southeastern New Mexico. Growth in the Haynesville region reflects the lagged effects of high natural gas prices in 2022 that increased drilling activity in the region. Growth in natural gas production in the Permian, which is mostly associated with natural gas, has been driven by relatively high oil prices and increased oil production.
We forecast dry natural gas production will remain close to record levels through much of the rest of the forecast period, averaging around 103 Bcf/d during the second half of 2023 and 2024. The flat production reflects reduced natural gas-directed drilling in response to the drop in natural gas prices this year being offset by increasing associated natural gas production in the Permian Basin. Higher expected crude oil prices in this month’s STEO compared with last month result in our upward revision of natural gas production in this month’s outlook, despite lower natural gas prices in the forecast.
Natural gas prices
We expect the U.S. benchmark Henry Hub natural gas spot price to rise in the summer months, averaging just over $2.60/MMBtu in 2Q23, up from an average of $2.15/MMBtu in May.
Rising natural gas use in the electric power sector and flattening production growth – which together contribute to storage injections that are less than the five-year average (2018–2022) in the coming months – are the primary drivers.
The Henry Hub spot price averages around $3.40/MMBtu in 2024 in our forecast, nearly 30% higher than in 2023.
Although we forecast an increase in natural gas prices for the summer months due to inventories narrowing the surplus to the five-year average, we expect high inventory levels will keep prices well below last year’s prices, which averaged almost $8.00/MMBtu in 3Q22. Natural gas storage inventories were 15% above the five-year average at the end of May compared with a deficit of 14% below the 2017–2021 average at the end of May 2022.
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