Analysts at the U.S. Energy Information Administration said the subdued demand for natural gas will continue through August and keep spot gas prices around $2.00/MMBtu.
Come September, however, demand is expected to recover. “Despite EIA’s forecast of record end-of-October storage levels, we expects that rising demand heading into winter, combined with reduced production, will cause upward price pressures,” the agency said in its latest short-term energy outlook.
Total US consumption of natural gas is expected to average 81.9 billion cubic feet per day in 2020, down 3.6 percent from 2019.
“The decline primarily reflects less consumption in the industrial-sector, which the EIA forecasts will average 21.0 Bcf/d in 2020, down 8.7 percent from 2019 as a result of reduced manufacturing activity,” the report noted.
Dry gas production hits fresh record
US dry natural gas production set an annual record in 2019, averaging 92.2 Bcf per day and the EIA forecasts production will average 89.7 Bcf/d in 2020, with monthly production falling from 96.2 Bcf/d in November 2019 to 83.6 Bcf/d in March 2021, before increasing slightly.
“Natural gas production declines the most in the Appalachian and Permian regions,” the report reads. In the Appalachian region, low natural gas prices are discouraging producers from engaging in natural gas-directed drilling, and in the Permian region, low crude oil prices reduce associated natural gas output from oil-directed wells.
In 2021, analysts see production of dry natural gas in the US average 85.4 Bcf per day. The EIA then expects production to begin rising in the second quarter of 2021 in response to higher prices.
Coal-to-gas switch continues
In the power market, the report forecasts that the share of US utility-scale electricity generation from natural gas-fired power plants will increase from 37% in 2019 to 41% in 2020.
“In 2021, the forecast natural gas share declines to 36% in response to higher natural gas prices,” it said. “Coal’s forecast share of electricity generation falls from 24% in 2019 to 17% in 2020 and then increases to 20% in 2021.”