Quarterly natural gas consumption falls to lowest level in 5 years

U.S. natural gas consumption is expected to be lower in the first quarter than in any of the same periods since 2018, according to the U.S. Energy Information Administration (EIA). First-quarter average consumption of about 99 billion cubic feet per day is the least for any first quarter since 2018.

The EIA released Tuesday (March 7) the March Short-Term Energy Outlook that shows January and February were likely to be among the warmest on record in data going back to 1895, and this contributed to lower heating demand, resulting in lower consumption. This will lead to lower prices and more natural gas in storage.

EIA expects 2023 wholesale prices of natural gas to be half of the 2022 average. Inventories are projected to be 23% more than the five-year average at the end of the first quarter.

“A lot less natural gas was consumed in the U.S. residential and commercial sectors than we generally expect in January and February,” said EIA Administrator Joe DeCarolis. “The warmer weather in most of the country means homes and businesses haven’t been running their heating systems as much as they normally do during these months.”

In 2023, the average Henry Hub natural gas spot price is expected to be about $3 per million British thermal units. In January, the EIA had projected the price this year to be almost $5 per million British thermal units.

Following are other highlights from the March outlook:

• U.S. wholesale electricity prices are expected to fall in 2023, from 2022, because of the lower natural gas prices and a rising share of electricity being generated by renewable energy. “We expect renewable energy sources to keep growing as a share of U.S. electricity generation, and that should help reduce wholesale electricity prices this year,” DeCarolis said.
• U.S. liquified natural gas (LNG) exports will rise by 14% to about 12 billion cubic feet per day in 2023, from 2022. The increase can be attributed to the Freeport LNG export facility returning to full service. The exports are projected to rise to a record 14 billion cubic feet per day in 2024 as more LNG export facilities begin operating.
• Despite sanctions, Russia has largely found alternate markets for its petroleum exports. In 2023, Russia is expected to produce 10.3 million barrels per day of crude oil, down from 10.9 million barrels per day in 2022.
• Liquid fuels consumption in China is expected to rise by 700,000 barrels per day in 2023, from 2022. The increase can be attributed to a rise in travel following the end of lockdowns related to COVID-19.