In the Appalachian region, low natural gas prices are discouraging producers from engaging in natural gas-directed drilling, and in the Permian region, low oil prices reduce associated gas output from oil-directed wells. In 2021, forecast dry natural gas production averages 84.9 Bcf/d, rising in the second half of 2021 in response to higher prices.
Overall U.S. dry gas production reaches a record of 92.2 Bcf/d in last year, but is forecast to plunge to 89.8 Bcf/d in 2020 due to low oil prices, with monthly production falling from an estimated 93.1 Bcf/d in April to 85.4 Bcf/d in December.
On the demand side, the EIA expects total gas consumption will average 81.7 billion cubic feet per day (Bcf/d) in 2020, down 3.9% from the 2019 average primarily because lower lower manufacturing activity due to the coronavirus outbreak.
LNG will are forecast to average 5.8 Bcf/d in the second quarter and 4.8 Bcf/d in the third quarter of 2020. U.S. gas exports are declining through the end of the summer in reaction to lower global demand, with some LNG buyers having deferred or cancelled cargoes.
Heightened uncertainty
The EIA stressed its Short-Term Energy Outlook (STEO) remains subject to heightened levels of uncertainty because the effects on energy markets of mitigation efforts related to the COVID-19 outbreak are still evolving. Lockdowns to contain the spread of the pandemic caused significant changes in energy supply and demand patterns.
Crude oil prices, in particular, have fallen significantly since the beginning of 2020, after demand fell off a cliff when most countries went on lockdown during March and April. Brent crude oil traded as low as $18 per barrel in April, down from an average of $64/b in 2019.
Analysts at the EIA said prices are likely to recover to an average $23/bbl during the second quarter of 2020, before increasing to $32/bbl during the second half of the year. Global oil inventories fill up fast which puts upward pressure on prices, but much depends on whether reduced travel and fuel use will persist as some restrictions related Covid-19 remain in place.