High export demand for LNG and higher domestic natural gas consumption pushed U.S. gas demand to higher levels than supply last year, resulting in the highest average Henry Hub spot price since 2008, the Federal Energy Regulatory Commission (FERC) said in its 2022 State of the Markets report.

Yet, U.S. natural gas prices have dipped in recent months due to warmer than usual winter weather which required lower volumes of withdrawals from storage. As a result, working natural gas stocks in storage is around 24% more than the five-year average, and 36% more than last year at this time. This puts downward pressure on Henry Hub prices, which saw two consecutive cuts in price forecasts in two months from the U.S. Energy Information Administration (EIA).

“Tight LNG supplies contributed to increasing international prices, which reached record levels, incentivizing U.S. LNG exports,” FERC said in its report.

“The approval and expansion of multiple LNG export facilities in 2022 increased LNG liquefaction capacity to serve the growing international LNG demand to higher-priced regions.”

Unlike in previous years, Europe was the top destination of U.S. LNG exports in 2022, with U.S. shipments soaring by 141%, the EIA said.

Europe accounted for 64% of U.S. LNG exports in 2022. Four countries—France, the UK, Spain, and the Netherlands—accounted for a combined 74% of U.S. LNG exports to Europe. 

The surge in exports to Europe meant that U.S. LNG exports to Asia declined .

The overall increase in U.S. LNG exports, combined with higher domestic gas demand, sent U.S. benchmark prices to multi-year highs last year. 

The Henry Hub averaged $6.38 per MMBtu in 2022, up from $3.82/MMBtu in 2021.

“This was the highest average spot price at Henry Hub since 2008, and the largest absolute year-over-year average price increase since 2005,” FERC researchers said in the report.

“In 2022, natural gas demand was driven by increased domestic natural gas consumption and LNG exports. Although production did not keep pace with demand, it continued the growth trend seen in the last decade,” they added.

This year, Henry Hub prices have dropped due to milder winter weather in January and February in many parts of the United States. Natural gas inventories rose to above the five-year average, weighing down on prices.