U.S. spot natural gas prices this summer at the Henry Hub benchmark in Louisiana were on track to be the lowest since 1998 due to relatively mild weather in June, according to a forecast by the U.S. Energy Information Administration (EIA).
That cooler weather early in the summer led power generators to burn less gas than expected to keep air conditioners humming, which allowed utilities to inject more of the fuel into inventories for the winter heating season when demand peaks, EIA said in a release on Thursday.
EIA forecast prices at the Henry Hub will average $2.37 per million British thermal units (mmBtu) in June, July and August. That compares with $2.92 during the summer of 2018 and a five-year (2014-2018) average of $3.07. Prices averaged $2.06 during the summer of 1998.
Between April and June, EIA said cumulative net injections into underground storage fields exceeded the five-year average by 41%, reducing the current five-year average deficit by more than 300 billion cubic feet (Bcf).
One billion cubic feet of gas is enough to supply about five million U.S. homes for a day.
EIA, however, noted fuel prices could be higher than forecast if temperatures for the rest of the summer are warmer than expected, which would cause consumers to crank up their air conditioners and power generators to burn more fuel to keep up with the higher electric demand.
For now, EIA said drillers were still pulling record amounts of gas out of the ground despite lower prices. But, looking forward, EIA projected supply growth will start to moderate in late 2019 and in 2020, likely causing gas prices to rise.
EIA forecast Henry Hub spot prices will average $2.50 per mmBtu in the second half of 2019 and $2.77 in 2020.
The decline in Henry Hub prices so far this summer was also reflected at other trading hubs across the country.
Prices at the Transcontinental Pipeline Zone 6 trading point for New York City and the Chicago Citygate were both at $2.12 per mmBtu in June, a decrease of 25% and 23%, respectively, from June 2018, EIA said.
The spot price at the PG&E Citygate near San Francisco, meanwhile, averaged $2.59/MMBtu in June, a 14% decrease from the same month last year, EIA said.