Forecast: Natural Gas Use Higher This Winter Than Last

Colder temperatures compared to last winter and changes in consumer behavior are two factors boosting the outlook for residential natural gas consumption for winter 2020-21. The U.S. Energy Information Administration (EIA) is forecasting a 5% increase in residential natural gas consumption in the coming winter season compared to the same time last year.

The prediction comes in EIA's fall Short-Term Energy Outlook, which was released in October amid continued leve s of uncertainty as to economic activity and response during the lingering COVID-19 pandemic.

While long-term winter forecasts from the National Oceanic and Atmospheric Administration (NOAA) have a mixed outlook for above or below normal temperatures for different regions of the country, the overall forecast calls for colder temperatures compared to last year's mild winter resulting in more days of residential heating use resulting in higher demand for fuels.

NOAA has the greatest chances for warmer-than-normal conditions spreading across the Southern tier of the U.S. with more modest chances for warmer temperatures along the southern west coast and from the Mid-Atlantic into the Northeast. Below-normal temperatures are favored in southern Alaska and from the northern Pacific Northwest all across the Northern Plains.

Nearly half of all homes in the US are primarily heated with natural gas. While temperature is one factor affecting natural gas demand, the COVID-19 pandemic is another, as it is forcing more of the population to work and conduct virtual schooling from home. Both factors lead to an expected rise in residential space heating demand compared to last year.

Both Range Resources and EQT saw curtailed production during the third quarter of 2020 due to weakness in local prices. In October, the Henry Hub natural gas spot price averaged $2.39 per million British thermal units (MMBtu), up from an average of $1.92. However, prices are predicted to rise and remain higher than $3.00 /MMBtu throughout 2021.

While the Natural Gas Supply Association (NGSA) is projecting that lower production, growing exports and colder temperatures will likely push natural gas prices higher compared to last winter, the EIA's Winter Fuels Outlook predicts average prices for residential natural gas for home heating will hover around $9.55 per thousand cubic feet (Mcf). That number is 2% lower than last winter.

Prices may be lower but the outlook for increased usage means the average home that is heated by natural gas will likely spend more money on energy bills this winter than last. EIA sees the average energy bill for natural gas-heated homes rising about 6% over last winter with homeowners spending an average of $572. That's about $32 more than last winter.