EIA expects volatile US gas prices this winter

16 November 2021

After extremely cold weather in February led to lower-than-average natural gas storage levels in the USA through the summer, concerns about winter weather are contributing to volatile natural gas prices as the winter heating season begins. In its November Short-Term Energy Outlook the US Energy Information Administration estimates that US natural gas storage levels had built to within 3% of the previous five-year average at the end of October. 

“Mild weather has limited natural gas consumption and helped bring our storage levels closer to average in recent weeks, but cold winter weather could continue to put upward pressure on prices,” said EIA acting administrator Steve Nalley. “Winter temperatures will be the key driver of natural gas demand, inventories, and ultimately prices.” 

Despite relatively high gas prices, the US electric power sector continues to use significant amounts of natural gas for generation. In addition, EIA estimates that US natural gas exports in the form of LNG averaged 9.8 billion cubic feet per day (Bcf/d) in October, which is 37% above the October 2020 level, and are essentially at capacity. US natural gas exports will most likely remain close to capacity for the remainder of this year and in 2022 to meet global demand. 

Other highlights from November’s STEO include a report on spot prices for Brent crude oil, which averaged $84 per barrel in October, a $9 increase from September. EIA expects prices to average $82 per barrel in the fourth quarter and $72 in 2022. 

EIA estimates 18% more coal will be used to generate electricity in the United States in 2021 than in 2020, breaking a long-standing trend. The power sector’s increased use of coal in a reaction to significantly higher natural gas prices. EIA also estimates that coal exports will increase 29% this year because of similar dynamics in global electricity generation.

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