High production and higher temperatures to keep natural gas prices in check

March 15 (UPI) -- After soaring last year on the back of a war premium, an increase in domestic natural gas production should help put a ceiling over the U.S. price of natural gas, a consultant group said Wednesday.

Henry Hub, the U.S. benchmark for the price of natural gas, was trading at around $2.40 per million British thermal units on Wednesday, a level that's been relatively stable over the better part of March.

Henry Hub at this time last year -- a few short weeks after Russian military forces crossed into Ukraine -- was closer to $4.56 and moved as high as $9.65 as markets adjusted to the loss of Russian natural gas due to Western-backed sanctions.

A report emailed to UPI from Norway-based consultant group Rystad Energy said an increase in domestic production contributed to the declines from year-ago levels.

"Supply growth expectations were high coming into the year and as winter failed to materialize it had a negative effect on our price forecast," North America gas and LNG market analyst Ade Allen wrote.

Federal forecasts suggest the period from January to February was likely the warmest since 1895, suppressing demand for heating fuels such as natural gas. Rystad, meanwhile, expects total gas production to increase by nearly 4% from year-ago levels, with support coming from the Haynesville and Permian shale basins.

Those two shale basins, situated in the southern United States, account for about 40% of total U.S. natural gas production. Estimates show total U.S. gas production should average 96.2 billion cubic feet per day (Bcf/d) in March and 100.6 Bcf/d for the full-year average.

Elsewhere, domestic storage levels of natural gas remain elevated due to the six-month outage at the Freeport LNG export facility in Texas. The facility is recovering from a pipeline explosion in June and delivering cargo again, though recovery should only slowly eat into domestic inventories.

Rystad added that Freeport's return won't have a major impact on prices over the short-term horizon.

After averaging $6.42 last year, a federal forecast puts Henry Hub at a $3.02 for the year.