The Energy Information Administration expects U.S. natural gas consumption to increase by 2.5 billion cubic feet per day (Bcf/d) (3.0%) in 2019, according to EIA’s just-released Short-Term Energy Outlook (Steo), Kallanish Energy reports.
The latest data is up from expected growth of 1.5 Bcf/d (1.8%) projected in the March Steo. The forecast largely reflects higher consumption in the first quarter of 2019, as a result of estimated heating degree days for March higher than previously forecast.
Colder-than-expected temperatures in March raised consumption of natural gas for space heating use in the residential and commercial sectors. In addition, EIA slightly raised its forecast growth of natural gas consumption in the industrial and electric power sectors for 2019.
EIA/Steo expects strong growth in U.S. natural gas production to put downward pressure on prices in 2019 and in 2020. EIA expects Henry Hub natural gas spot prices will average $2.82/Mmbtu in 2019, down $0.33/Mmbtu from 2018. The forecasted 2020 Henry Hub spot price is $2.77/Mmbtu.
Working gas in underground storage declined to 1.16 trillion cubic feet (Tcf) at the end of March, the lowest level since 2014, according to EIA estimates. However, EIA forecasts steadily rising gas production will contribute to inventory builds outpacing the 5-year average during the 2019 injection season, which will bring natural gas inventories to 3.67 Tcf at the end of October, 1% lower than the 5-year average compared with inventory levels that were 30% lower than the 5-year average at the end of March.
Prices at the Waha Hub in West Texas, near the Permian Basin, averaged $0.73/Mmbtu in March, $2.22/Mmbtu lower than the average Henry Hub spot price during the same period. Multiple force majeures have constrained pipeline capacity and reduced westbound flows out of the Permian, which has put downward pressure on prices.
Prices at the Waha Hub turned negative during the last week of March, and they fell to a record low of -$4.63/MMbtu on April 3.
EIA expects additional gas pipeline capacity out of the Permian to come online later in 2019, which should help to stabilize prices at the Waha Hub.
This post appeared first on Kallanish Energy News.