A historic low in natural gas prices should ease over the next two years, according to a forecast released Monday by the U.S. Energy Information Administration.
Following a December average of $1.93 for the Henry Hub benchmark, federal analysts predict gas prices will average $2.65 per MMBtu this year and $3.22 in 2017, FuelFix.com reports.
Henry Hub is an important distribution hub in a natural gas pipeline near Erath in Vermilion Parish whose name is used as the pricing point for natural gas futures contracts traded in New York.
Oil and gas drillers across the United States have struggled under collapsing commodity prices, driven in part by a boom in domestic shale drilling that has transformed the industry.
But the U.S. gas surge is now beginning to taper off. This year U.S. production is only expected to grow by 0.6%–compared to a 7% annual growth rate in 2015.
And forecasters are expecting the demand for gas to increase. They pointed to high consumption by the U.S. power sector, as it shifts away from coal and towards gas and renewables. At the same time cheap natural gas had led to increased demand from the industrial sector, which uses the fuel to produce chemicals and fertilizer.
Even with a rise over the next two years, natural gas prices are expected to remain historically cheap. Since 2005 the Henry Hub benchmark has averaged $5.18 per MMBtu.
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