Natural Gas demand and price predictions going through the winter of 2023-2024

As the winter season approaches, many consumers and businesses are wondering how the gas market will behave in the coming months. Natural gas is a vital commodity for heating, cooking, electricity generation and transportation, and its price and availability can have significant impacts on the economy and the environment.

In this TradesArt article, we will analyze the current and projected gas demand and supply, as well as the factors that influence the gas price, and provide some forecasts for the winter of 2023-2024.

Natural Gas demand

Natural Gas demand is influenced by several factors, such as weather, economic activity, population growth, energy efficiency and fuel switching. According to the U.S. Energy Information Administration (EIA), the total U.S. natural gas consumption in 2022 averaged 83.4 billion cubic feet per day (Bcf/d), a 1.4% increase from 2021. The main drivers of this growth were the industrial and electric power sectors, which increased their gas consumption by 2.6% and 2.1%, respectively.

The EIA expects the U.S. natural gas consumption to decline slightly to 82.9 Bcf/d in 2023 and 82.5 Bcf/d in 2024, mainly due to lower demand from the electric power sector, as more renewable energy sources come online and displace gas-fired generation. However, this decline could be offset by higher demand from the residential and commercial sectors, especially during the winter months, when gas is used for heating purposes.

The EIA projects that the U.S. natural gas consumption in the fourth quarter of 2023 will average 93.8 Bcf/d, a 0.7% increase from the fourth quarter of 2022. The EIA also forecasts that the U.S. natural gas consumption in the first quarter of 2024 will average 94.6 Bcf/d, a 1.5% increase from the first quarter of 2023.

Natural Gas supply

Gas supply is determined by domestic production, imports and exports, and storage levels. According to the EIA, the total U.S. natural gas production in 2022 averaged 93.9 Bcf/d, a 5.8% increase from 2021. The main contributors to this growth were the Appalachian Basin, which increased its production by 7.7%, and the Permian Basin, which increased its production by 6.9%.

The EIA expects the U.S. natural gas production to continue to grow to 95.8 Bcf/d in 2023 and 97 Bcf/d in 2024, driven by higher prices and improved drilling efficiency. However, this growth could be constrained by environmental regulations, infrastructure constraints and competition from other energy sources.

The EIA projects that the U.S. natural gas net exports (exports minus imports) will increase from an average of 8 Bcf/d in 2022 to 9 Bcf/d in 2023 and 10 Bcf/d in 2024, as more liquefied natural gas (LNG) export terminals come online and more pipeline capacity is added to Mexico and Canada.

The EIA estimates that the U.S. natural gas storage levels at the end of October 2022 were 3,590 billion cubic feet (Bcf), which is about 1% below the five-year average for that time of year. The EIA forecasts that the U.S. natural gas storage levels at the end of October 2023 will be slightly higher at 3,610 Bcf, but still below the five-year average.

Natural gas price

Natural gas price is influenced by the balance between demand and supply, as well as by other factors such as weather, geopolitics, market expectations and speculation.

Russia vs Ukraine war and the implications on natural gas in Europe

The natural gas situation in Europe during the war in Ukraine and 2024 outlooks

The war in Ukraine, which started in February 2022 when Russia invaded its eastern neighbour, has had a profound impact on the energy markets in Europe and beyond. The conflict has disrupted the supply of natural gas from Russia, which was the main source of imported gas for the European Union (EU) before the invasion. This has led to a sharp increase in gas prices and volatility, as well as knock-on effects on electricity prices and energy security. In this blog post, we will analyse the natural gas situation in Europe during the war in Ukraine and provide some outlooks for 2024.

The role of Russia in Europe’s gas supply

Russia has been a major supplier of natural gas to Europe for decades, accounting for around 40% of all imported gas to the EU in 2021, according to the European Commission. Russia exported gas to Europe mainly through pipelines that crossed Ukraine, Belarus and Poland, as well as through the Nord Stream pipeline that runs under the Baltic Sea directly to Germany. Russia also exported liquefied natural gas (LNG) to Europe by sea, although this was a smaller share of its total exports.

The EU’s dependence on Russian gas varied across countries, with some being more exposed than others. According to Al Jazeera’s analysis of data from BP’s Statistical Review of World Energy, Belarus was the most reliant on gas in 2021, with 62% of its energy needs provided by gas, followed by Russia itself, with 54%, and Italy with 42%. Cyprus and Iceland were the only two countries in Europe that consumed no gas in 2021.

The impact of the war in Ukraine on gas prices and supply

The war in Ukraine has generated a severe shock to the gas market in Europe, as Russia has drastically reduced its gas exports to the EU since the invasion. According to the International Energy Agency (IEA), Russia cut its gas flows to the EU by around 80% between May and October 2022, compared with the same period in 2021. This has created a supply shortfall that has pushed up gas prices to unprecedented levels.

The chart below shows the evolution of gas prices in Europe before and after the invasion of Ukraine, measured by the Dutch Title Transfer Facility (TTF) day-ahead prices, which are a benchmark for European gas trading. Gas prices spiked by around 180% in the first two weeks after the invasion, reaching a record high of over €200 per megawatt hour (MWh) on 9 March 2022. Since then, gas prices have moderated somewhat, but they remain well above their pre-invasion levels, averaging around €100 per MWh in June 2022.

The high and volatile energy prices have posed significant challenges for energy security and affordability in Europe. Many households and businesses have faced higher energy bills and some have struggled to pay them. Some governments have intervened to provide financial support or price caps for vulnerable consumers, while others have called for more coordination at the EU level to address the crisis.

How has Europe coped with the gas shortage?

Despite the dramatic reduction in Russian gas exports, Europe has managed to avoid major disruptions to its gas supply so far. This is thanks to several factors that have helped to mitigate the impact of the shock.

First, EU gas storage sites were relatively full at the start of the crisis, as Russia had maintained steady gas flows to Europe in the first half of 2022. According to the IEA, EU gas storage sites were 95% full as of early November 2022, which is 5% above

Conclusion and price outlooks

Natural gas is a key source of energy for many countries, especially the United States, which has increased its production and consumption of this fossil fuel in recent years. However, the natural gas market is also influenced by various factors, such as weather, supply, demand, exports, and technology. In this blog post, we will look at some of the natural gas price predictions for 2024 based on the latest data and analysis.

According to the U.S. Energy Information Administration (EIA), the natural gas spot price at the Henry Hub, the U.S. benchmark, will average $4.90 per million British thermal units (MMBtu) in 2023, and $4.88 per MMBtu in 2024. The EIA expects the prices to decline from their current levels of around $5.00 per MMBtu in the first quarter of 2023, as dry natural gas production continues to grow and outpaces domestic and export demand for most of the year.

The EIA forecasts that U.S. dry natural gas production will average 100.6 billion cubic feet per day (Bcf/d) in 2023, and 102.5 Bcf/d in 2024, an increase of about 2% each year. The main driver of this growth is the shale gas production from hydraulic fracturing and horizontal drilling, which has reduced the cost and increased the availability of natural gas in the U.S.

On the demand side, the EIA projects that U.S. natural gas consumption will average 82.8 Bcf/d in 2023, and 81.9 Bcf/d in 2024, a decrease of about 1% each year. The main reason for this decline is the lower natural gas use in the electric power sector, as more renewable energy sources come online and electricity demand decreases due to cooler weather. However, this decline will be partially offset by higher U.S. liquefied natural gas (LNG) exports, which will average 12.1 Bcf/d in 2023, and 13.1 Bcf/d in 2024. The EIA expects new LNG export facilities to come online in late 2024 and early 2025, increasing the U.S. LNG export capacity.

Other sources have different natural gas price predictions for 2024, depending on their assumptions and methodologies. For example, PrimeXBT, a trading platform for cryptocurrencies and commodities, forecasts that the natural gas price will average $3.50 per MMBtu in 2024. The platform cites several factors that could put downward pressure on the price, such as increased production from Russia and Qatar, lower demand from China and Europe due to environmental policies and economic slowdowns, and technological innovations that could reduce the cost of renewable energy.

On the other hand, Natural Gas Intelligence (NGI), a news and analysis service for the natural gas industry, reports that some energy analysts have lowered their natural gas price forecasts for 2023 and 2024 due to the recent slump in the market. For example, BMO Capital Markets analysts have reduced their 2023 estimate from $3.60 to $3.10 per MMBtu, and their 2024 assumption from $4.50 to $3.70 per MMBtu. The analysts attribute this revision to lower demand expectations, higher production projections, and increased storage levels.

In conclusion, natural gas prices are expected to decline in the next few years as supply grows faster than demand in the U.S. and globally. However, there are also uncertainties and risks that could affect the market, such as weather variations, geopolitical tensions, environmental regulations, and technological disruptions. Therefore, natural gas price predictions for 2024 should be taken with caution and updated regularly based on new data and information.