By: Corina Ricker – EIA – In our June 2021 Short-Term Energy Outlook (STEO), we forecast U.S. natural gas prices to increase during 2021 and 2022 from 2020 prices as a result of expected growth in natural gas consumption and natural gas exports that outpace expected growth in production and imports. We also forecast the 2021 Henry Hub natural gas spot price to average $3.07 per million British thermal units (MMBtu), an increase of $1.04/MMBtu from the record lows of 2020.
Increases in both U.S. natural gas exports and consumption from all other natural gas-consuming sectors but electricity generation are driving the high Henry Hub spot prices reflected in the STEO. The high natural gas prices set in February 2021 set the annual average 2021 price path higher, making 2021 the peak in our forecast.
The February 2021 cold snap that affected much of the central part of the country, including Texas, reduced supply and increased demand for natural gas, resulting in near-record storage withdrawals that drove the extremely high natural gas prices. The February 2021 Henry Hub price averaged $5.35/MMBtu, or $3.44 MMBtu higher than in February 2020. Although prices did not remain elevated, the February price has raised the annual 2021 average.
The increase in U.S. natural gas demand in 2021 is primarily a result of a 3.8 billion cubic feet per day (Bcf/d) increase in U.S. exports of natural gas from 2020 to 2021. We expect U.S. exports of natural gas by pipeline and as liquefied natural gas, combined, to average 18.3 Bcf/d in 2021 and 18.4 Bcf/d in 2022, both exceeding the current record of 14.4 Bcf/d set in 2020. We expect increases in natural gas consumed in the industrial, residential, and commercial sectors to contribute to the overall increase in 2021 natural gas demand. These increases in demand are slightly offset by a decrease in natural gas consumption in the electric power sector as a result of higher natural gas prices. We expect natural gas consumed in the electric power sector to average 29.4 Bcf/d in 2021 and 29.3 Bcf/d in 2022, both decreases from 31.7 Bcf/d in 2020.
We expect the Henry Hub average spot price to decrease to $2.93/MMBtu in 2022 from the 2021 average. In 2022, U.S. supply grows by 0.66 Bcf/d, but non-power sector demand grows by 0.31 Bcf/d—a slower rate than supply growth. In 2022, a 1.8 Bcf/d rise in U.S. natural gas production drives the forecast growth in natural gas supply, which is slightly offset by a decline in U.S. imports of natural gas. U.S. natural gas supply will likely outpace U.S. demand in 2022, which supports our forecast of a price decline from 2021 to 2022.