Analyst Lowers Henry Hub Price Forecast

Fitch Solutions Country Risk & Industry Research has lowered its Henry Hub gas price forecast for 2021, a report sent to Rigzone early on Tuesday has revealed.

The company now sees the Henry Hub price coming in at $3.7/mnBTU in 2021, compared to its previous forecast of $3.9/mnBTU. Looking ahead, Fitch Solutions is forecasting that the Henry Hub price will average $4/mnBTU in 2022, $3.9/mnBTU in both 2023 and 2024, and $3.8/mnBTU in 2025.

“A mild start to the winter heating season in the U.S. has supported lower early season consumption,” Fitch Solutions analysts stated in the report.

“We have reduced our price forecast to $3.7/mnBTU for 2021 from $3.9/mnBTU on a sharper than expected decline in prices across Q4 2021 on lower seasonal demand for natural gas. The warm weather has helped boost natural gas in storage putting downward pressure on prices as concerns for a shortfall become increasing unlikely,” the analysts added in the report.

“However, we expect U.S. natural gas prices to remain well elevated above historic averages as consumption and exports are expected to remain buoyant while supply growth remains modest,” the analysts continued.

Should the U.S. weather turn unseasonably colder, the analysts said they would expect prices to climb and support their expectations for increased volatility in 2022.

“Overall, we expect many of the same factors that drove prices higher in H2 2021 to remain in play, including strong LNG exports and consumption with 2022 Henry Hub prices forecast to average $4/mnBTU”.

In the report, the Fitch Analysts noted that their long-term view for prices remains broadly bullish from current spot prices as consumption and robust exports continue to keep markets undersupplied.

“Upstream activity is slowing increasing, however the growth in supply is not expected to outpace demand in the coming years. U.S. independent shale producers will continue to exercise constraint in capital expenditure choosing instead to create shareholder value through increased dividends and share buy backs,” the analysts stated.

“We anticipate this dynamic to remain in play for the bulk of U.S. shale producers although we could see private firms and the oil majors buck this trend as both have varied underlying pressures which differ from the independents. We anticipate that working gas in storage will remain nearer to the 5-year average or below over the coming years in line with our views for elevated prices in the long-term,” the analysts added.

Back in November, Fitch Solutions analysts said they expected the price of Brent crude oil to enter the new year at around the $80 per barrel mark, supported by the ongoing recovery in oil demand, continued constraints on supply and spillovers from the broader energy crisis.

Fitch Solutions Country Risk & Industry Research offers in-depth data and research for over 200 markets and 22 industries, its website shows. The Fitch Solutions Country Risk and Industry Research Service (formerly BMI) has delivered high quality business intelligence for more than 35 years, the company’s site highlights.

To contact the author, email andreas.exarheas@rigzone.com