Throughout 2020, Henry Hub spot prices are seen averaging $2.11/MMBtu and increasing further in 2021, reaching an annual average of $2.51/MMBtu.
The rebound comes after spot prices eased off as low as $1.91/MMBtu amid excess supply an unusually mild winter. “Warmer-than-normal temperatures in February reduced demand for space heating and put downward pressure on prices,” EIA analysts said.
On the supply side, the plunge in global oil prices impacts the profitability of U.S. fracking activities and will gradually lead to lower production of both shale oil and gas.
Though the EIA still expects gas production in 2020 will rise 3% to an average 95.3 Bcf/d, the rate of output increase slows substantially. Anticipating a downward trend, the EIA expects monthly production to generally decline through 2020, falling from an estimated 96.5 Bcf/d in February to 92.3 Bcf/d in December.
“The falling production mostly occurs in the Appalachian and Permian regions. In the Appalachian region, low gas prices are discouraging producers from engaging in gas-directed drilling, and in the Permian region, low oil prices reduce associated gas output from oil-directed wells,” analysts commented.
In 2021, EIA forecasts dry natural gas production will rise from December 2020 levels in response to higher prices. Forecast dry natural gas production for 2021 averages 92.6 Bcf/d.
US working natural gas in storage ended February at 2.1 trillion cubic feet (Tcf), 9 percent more than the five-year (2015-2019) average. The EIA forecasts that total working inventories will end March at 1.9 Tcf, 12 percent more than the five-year average. During the April through October injection season, inventories are seen rise by almost 2.1 Tcf to reach almost 4.0 Tcf on October 31.