US sees natural gas price recovery by the end of 2020
Henry Hub natural gas spot price averaged $1.75 per mmBtu in May and ‘relatively low demand‘ will keep spot prices lower than $2 per mmBtu through to August
US natural gas prices will remain relatively flat through to August before seeing a rise of 50% heading into January 2021, according to the Energy Information Administration.
Low demand is largely responsible for current pricing, the administration said in its June short-term energy outlook.
The Henry Hub natural gas spot price averaged $1.75 per mmBtu in May and “relatively low demand” will keep spot prices lower than $2 per mmBtu through to August.
But prices are expected to rise by the end of 2021, with the sharpest increase coming this autumn and winter when they rise from an average of $2.06 per mmBtu in September to $3.08 per mmBtu in January 2021.
Despite its forecast of record storage levels at the end of October, EIA expects that rising demand and reduced production will cause upward price pressures heading into winter.
Henry Hub natural gas spot prices are expected to average $2.04 per mmBtu in 2020 and $3.08 per mmBtu in 2021.
Total US consumption of natural gas is expected to average 81.9bn cu ft per day in 2020, down 3.6% from 2019, reflecting lower industrial consumption, which is forecast to average 21bn cu ft per day in 2020, down 8.7% from last year because of lower manufacturing activity.
US dry natural gas production set an annual record in 2019, at an average of 92.2bn cu ft per day. Dry natural gas production is expected to average 89.7bn cu ft per day in 2020, with monthly production expected to drop from 96.2bn cu ft per day in November 2019 to 83.6bn cu ft per day in March 2021.
Natural gas production is expected to decline the most in the Appalachian and Permian regions. Low natural gas prices are discouraging producers from natural gas-directed drilling in the Appalachian region, while low crude oil prices reduce associated natural gas output from oil-directed wells in the Permian.
EIA forecasts production of dry natural gas in the US averaging 85.4bn cu ft per day in 2021, and — in response to higher prices — it expects production to begin rising in the second quarter of 2021.
Total US working natural gas in storage ended May at almost 2.8trn cu ft, 18% more than the five-year average for 2015–19.
The outlook forecasts inventories to rise by 2.1trn cu ft during the injection season, which begins in April, and they are expected to reach more than 4.1trn cu ft by the end of the season on October 31.
US LNG exports are also expected to average 5.6bn cu ft per day in the second quarter of 2020 and 3.7bn cu ft per day in the third quarter of 2020. US LNG exports are expected to decline through to the end of summer.