Natural gas outlook in the U.S. remains bleak through 2020, despite some support from reduced associated gas production, GlobalData said on Tuesday.
According to oil and gas analyst Steven Ho, the gas rig count is expected to drop by six rigs, from 41 at the end of March to 35 at the end of the year. The forecast is based on $1.5 billion capex cut by 15 major gas producers, Kallanish Energy notes.
The analytical company estimates that these companies will face a combined gas production of 1.45 billion cubic feet per day (Bcf/d) this year. The record low prices in early 2020 have impacted major shale plays such as the Appalachian basin, but the market remains oversupplied, GlobalData said.
In a sample to determine the economic viability of future wells in the Marcellus and Utica plays, the company said that less than 25% of the 2,800 sampled wells breakeven below $2.05 per thousand cubic feet (Mcf).
In April, U.S. natural gas prices averaged $1.74/Mcf, which is the lowest level since March 2016, according to the EIA.
Ho said that the current slowdown is affecting natural gas consumption over the next few months, especially in the commercial and industrial sectors. This reduction will be slightly offset by increased residential power usage in the summer.
“Natural gas industry will not recover in the near term through 2020, with dry gas production expected to remain at approximately similar level as 2019, accompanied by high level of working natural gas inventory and reduced demand due to current economic slowdown,” Ho concluded.
This post appeared first on Kallanish Energy News.