The most recent forecasts for the 2021 Winter Season point to above average amounts of late-season snowfalls and below average temperatures. As natural gas prices climb to their highest since 2018, it will be very important to see how these conditions turn out. Given existing constraints in the natural gas market at this time a severe winter could have a big impact on energy costs. The EIA’s current short-term outlook point to LNG exports surpassing pipeline exports for the first time, particularly relating to high LNG demand during the last Winter in Asia and the Caribbean. As more LNG projects are built this supply now flows outside of the U.S and constrains the build-up of local inventories.
Last Winter in February severely cold temperatures increased storage withdrawals by 14% compared to the prior five-year average, and due to increased exports through LNG and pipelines, injections this season are expected to be 5% below that same average. The gradual and consistent buildup of storage is critical as showcased by the ERCOT disaster this year. As demand gradually increases post COVID, and supply remains relatively flat, prices are expected to average around $3.00/MMBtu for the remainder of 2021 and face downward pressure in 2022 as production increases.
