In January, the Henry Hub natural gas spot price averaged $2.02 per million British thermal units (MmBtu), as warm weather contributed to below-average inventory withdrawals and put downward pressure on natural gas prices, the Energy Information Administration reports in its February Short-Term Energy Outlook (STEO).
At Feb. 6, the Henry Hub spot price had fallen to $1.86/MmBtu, and EIA expects prices will remain below $2.00/MmBtu in February and March, Kallanish Energy reports.
EIA forecasts prices will rise in the second quarter of 2020, as U.S. natural gas production declines and natural gas use for power generation increases the demand for gas.
The latest STEO projects prices to average $2.36/MmBtu in the third quarter of 2020, and Henry Hub natural gas spot prices will average $2.21/MmBtu in 2020. EIA expects natural gas prices will then increase in 2021, reaching an annual average of $2.53/MmBtu.
U.S. dry natural gas production set a record in 2019, averaging 92.1 billion cubic feet per day (Bcf/d). Although EIA forecasts dry natural gas production will average 94.2 Bcf/d in 2020, a 2% increase from 2019, EIA expects monthly production to generally decline through 2020, falling from an estimated 95.4 Bcf/d in January, to 92.5 Bcf/d in December.
The falling production mostly occurs in the Appalachian and Permian basins. In the Appalachian Basin, low natural gas prices are discouraging natural gas-directed drilling, while in the Permian, low oil prices are expected to reduce associated gas output from oil-directed wells.
In 2021, EIA forecasts dry natural gas production to stabilize near December 2020 levels at an annual average of 92.6 Bcf/d, a 2% decline from 2020, which would be the first decline in annual average natural gas production since 2016.
EIA estimates U.S. working natural gas inventories ended January at more than 2.6 trillion cubic feet (Tcf), 9% higher than the five-year (2015–19) average. EIA forecasts total working inventories will end March at almost 2.0 Tcf, 14% higher than the five-year average.
In the February STEO, inventories rise by a total of 2.1 Tcf during the April through October injection season to reach almost 4.1 Tcf on Oct. 31, which would be the highest end-of-October inventory level on record.
This post appeared first on Kallanish Energy News.