We expect the U.S. benchmark natural gas spot price at the Henry Hub to average under $3.00 per million British thermal units (MMBtu) in 2024 and 2025 in our January Short-Term Energy Outlook (STEO). The annual average Henry Hub prices in 2024 and 2025 increase from 2023 in our forecast because we expect natural gas demand growth to outpace natural gas supply growth. Despite increased demand, our forecast prices for 2024 and 2025 are less than half the annual average price in 2022 and are only slightly higher than the $2.54/MMBtu we reported for 2023.
After averaging just under $6.50/MMBtu in 2022, the Henry Hub price declined to $3.27/MMBtu in January 2023, driven by warmer-than-average weather and reduced natural gas consumption in most of the United States. The Henry Hub price remained relatively low for all of 2023 because of strong natural gas production and more natural gas in storage.
We expect these drivers of low prices to continue over the next two years, as U.S. natural gas production remains relatively flat but grows enough to set new record highs. In our January STEO, U.S. dry natural gas production increases 1.5 billion cubic feet per day (Bcf/d) in 2024 from record highs in 2023 to average 105.0 Bcf/d. We forecast dry natural gas production increases again in 2025 by 1.3 Bcf/d to average 106.4 Bcf/d. Working natural gas inventories were above the previous five-year (2018–22) average for all of 2023, and we expect inventories will remain above the five-year average in 2024 and 2025 because of continued increases in natural gas production.
We also expect U.S. demand for natural gas—total natural gas consumption plus natural gas exports—to increase in 2024 and 2025, driven by growth in liquefied natural gas (LNG) exports, which we forecast to increase by 4% (0.5 Bcf/d) in 2024 and 17% (2.1 Bcf/d) in 2025. Consumption of natural gas in 2024 increases in the residential sector by 4% (0.5 Bcf/d) and in the commercial sector by 3% (0.3 Bcf/d) because we expect colder winter weather than in 2023. Last year started and ended with warmer-than-average temperatures.
In our forecast, U.S. consumption of natural gas in the electric power sector also increases modestly in 2024 by 1%. These increases in consumption are partially offset by less consumption in the industrial sector. U.S. consumption of natural gas in our forecast during 2025 is flat relative to 2024 levels in all sectors except for the electric power sector where we expect consumption to decrease by 0.2 Bcf/d.
In 2024, we expect U.S natural gas demand to increase more than supply—dry natural gas production plus natural gas imports—pushing up the average annual price in 2024 slightly. However, we expect prices to stay relatively low in 2024 because of strong natural gas storage inventories. We expect demand growth will exceed supply growth again in 2025, driven by more LNG exports, putting upward pressure on prices in 2025.
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