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Record-high natural gas production, flat demand, and high inventories resulted in U.S. benchmark natural gas prices averaging $2.57 per million British thermal units (MMBtu) in 2023, down by around 62% compared to the 2022 average, the U.S. Energy Information Administration (EIA) said on Thursday.
The monthly average Henry Hub price was below $3.00 per MMBtu in every month last year, except January, with the lowest monthly average in May at $2.19 per MMBtu, according to the data from Refinitiv Eikon cited by the EIA.
In the first half of 2023, the benchmark U.S. natural gas prices slumped by 34%, dragged down by record production, high inventories, and relatively mild winter temperatures. The average monthly spot natural gas price at the U.S. benchmark Henry Hub dipped by 34%, or by $1.12 per MMBtu, to $2.18 per MMBtu between January and June.
For the whole year 2023, the primary driver of the plunge in the average Henry Hub prices was the record-high natural gas production in the United States as the rise in output outpaced growth in consumption.
The EIA estimates that U.S. dry natural gas production averaged a record-high 104 billion cubic feet per day (Bcf/d) in 2023, up by 4% compared to the 2022 annual average.
At the same time, natural gas demand rose by 3% in 2023 year-on-year. Higher gas exports and a slight increase in natural gas consumed for electricity generation offset lower residential and commercial sector consumption. U.S. LNG exports went up by 12% in 2023 and natural gas exports by pipeline rose by 9% annually, according to EIA estimates.
Higher-than-average inventories at the start of the 2023/2024 winter heating season and record-high U.S. natural gas production have been weighing on natural gas prices in recent weeks.
The United States entered this winter heating season with the highest natural gas in storage since 2020, the EIA said in December.
By Tom Kool for Oilprice.com
Tom majored in International Business at Amsterdam’s Higher School of Economics, he is Oilprice.com's Head of Operations