US EIA bumps up gas production, consumption estimates for early 2021

The US Energy Information Administration continues to forecast lower average levels of US natural gas production and consumption in 2021, compared with the prior two years, but has raised its estimates for both measures in the first quarter and expects rising LNG export demand also will help push up natural gas prices.

EIA, in its November Short-Term Energy Outlook released Nov. 10, raised its total natural gas marketed production forecast by 0.51 Bcf/d to 96.99 Bcf/d its fourth-quarter 2020 and its Q1 2021 estimate by 1.06 Bcf/d to 95.1 Bcf/d.

After reaching an annual average of 100.04 Bcf/d in 2019, production is expected to average 98.51 Bcf/d in 2020 and decline further to 95.63 Bcf/d on average in 2021, EIA said.

Still, a rise in crude oil prices is seen raising associated gas production from oil-directed wells in late 2021, mostly in the Permian, the outlook said.

Consumption trends

The agency also expects a 1.7% decrease in natural gas consumption from 2019 to 2020, reflecting lower heating demand last winter.

"EIA expects to see a further 5.2% decline in 2021 as a result of rising natural gas prices reducing demand in the electric power sector," EIA Administrator Linda Capuano said in a statement accompanying the report's release.

The November outlook nonetheless raised natural gas consumption estimates by 310 MMcf/d to 87.59 Bcf/d for Q4, and by 1.68 Bcf/d to 95.54 Bcf/d for Q, compared with the prior month's forecast.

Capuano noted that the growling global demand for US LNG exports and rising demand for space heating is forecast to push up prices to average $3.42/MMBtu in January.

"EIA forecasts that US LNG exports will be above precoronavirus pandemic levels in November 2020, averaging 8.5 Bcf/d, and will average 8.4 Bcf/d in 2021, a 31% increase from 2020," the outlook said.

The agency raised its forecast for Q4 Henry Hub natural gas spot prices by 25 cents to $2.93/MMBtu, while the Q1 forecast nudged up just 3 cents from the previous month's estimates to $3.34/MMBtu.

Higher Henry hub levels

For the full year 2020, Henry Hub natural gas prices were estimated to average $2.14/MMBtu, rising to $3.14/MMBtu in 2021. That is up from the previous month's estimates of $2.07/MMBtu and $3.13/MMBtu, respectively.

Despite high storage levels, a rapid draw is expected this season.

At the end of October, working gas in storage reached its second-highest level, at almost 4 Tcf, up 5% from the prior five-year average, but lower production this winter compared with last is expected to drive increased inventory withdrawals, EIA said.

"With these larger withdrawals, we forecast inventory levels will end the winter in March 16% lower than the five-year average," Capuano said.

Revised electricity estimates

On the power side, EIA factored in revised historical data. It now forecasts industrial power use will fall by 9% between 2019 and 2020, rather than the 6% drop it forecast the prior month.

Overall, US consumption of electricity is expected to drop 3.6% in the US in 2020, before rising 0.9% in 2021.

In the coming year, EIA said "increased demand for space heating will be offset slightly by less forecast electricity consumption in the third quarter of 2021 because of less cooling demand based on the [National Oceanic and Atmospheric Administration] forecast of fewer cooling degree days," the outlook said.

The share of gas-fired power in the generation mix is seen dropping to 33% in 2021 in response to higher gas prices, compared with a 39% share for gas forecast for 2020.

Coal-fired power sees a rebound in 2021. "We expect coal's share to increase from 20% in 2020 to 25% in 2021, while the renewables share increases from 20% in 2020 to 22% in 2021," according to Capuano.

Lower consumption of fossil fuels were seen keeping CO2 emission levels 10% lower in 2020 than in 2019, but "EIA expects emissions to increase 6% in 2021 as the economy recovers and energy use increases," she said.