Both domestic natural gas production and U.S. crude oil production set all-time monthly records in December, the government reported Tuesday.
The U.S. Energy Information Administration estimated in its Feb. 6 short-term energy update that domestic crude production reached an all-time high in December of more than 13.3 million barrels per day. Natural gas production also set a monthly record in December, and domestic consumption of natural gas had a record month in January. Gas-burning for electricity generation during brutal winter weather helped drive the record consumption.
Natural gas prices that gyrated in January have moderated but could turn volatile again with even a brief return of bitterly cold weather heading toward spring, the EIA predicted.
“Although our forecast assumes that the United States will see milder weather with 4% fewer heating degree days than is typical during February and March, we forecast that U.S. natural gas consumption will increase by 5% in the first quarter of 2024 (1Q24) compared with 1Q23, which was one of the warmest first quarters on record,” the report’s overview said.
January’s cold weather crimped a record pace of natural gas production, which set a monthly record in December. The Henry Hub spot price for gas averaged $3.18 per million British thermal units in January, but spot prices were volatile, hitting $13.20 per million BTUs on Jan. 12. “Prices quickly fell and continued to decrease until January 23, when the price hit the monthly low of $2.15/MMBtu,” the report said. “We forecast that mild weather for the remainder of 1Q24 will keep the average Henry Hub spot price near $2.40/MMBtu during February and March. But volatility could return if severely cold weather emerges, even for a short period.”
Attacks on Red Sea shipping drove up the price of crude oil in January, when it averaged $80 per barrel. The EIA forecasts that prices will rise into the mid $80 range in coming months, but it expects downward price pressure in the second quarter “as global oil inventories generally increase through the rest of our forecast.” Ongoing risks of supply disruptions in the Middle East could raise prices again, it said.
After its record December, U.S. crude oil production fell to 12.6 million barrels per day in January, the agency said. “We forecast production will return to almost 13.3 million b/d in February but then decrease slightly through the middle of 2024 and will not exceed the December 2023 record until February 2025,” the report said.
The EIA expects electricity generation from renewable sources to grow in every region of the U.S. this year, “driven by our forecast of a 36-gigawatt increase in solar generating capacity,” the outlook said. “We forecast U.S. solar generation will rise by 43% in 2024 and wind generation will rise by 6%.”
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