The U.S. Energy Information Administration on Sept. 9 bumped up its estimates for natural gas production and Henry Hub spot prices for the second half of 2020, amid increased use of gas for generation and returning market support for exports.
EIA in its September Short-Term Energy Outlook raised by 2.59 Bcf/d to 95.66 Bcf/d its natural gas marketed production estimate for the U.S. in third-quarter 2020. The agency pushed the fourth-quarter estimates up as well by 2.86 Bcf/d to 94.33 Bcf/d.
There were multiple notable changes in the forecasts because of the rapidly changing situation in energy markets, the agency said. The outlook has seen swings in recent months amid the coronavirus pandemic and its related impact on the economy and the oil market.
Production changes
"EIA's September outlook forecasts that U.S. dry natural gas production will average 86.6 Bcf/d in 2021," EIA Administrator Linda Capuano said in a statement accompanying the report. "Although forecast production is down from 2020 levels, it is 3.1% higher than our August forecast because we expect higher natural gas prices in the second half of 2020."
Total marketed production is forecast to decline from an average of 97.14 Bcf/d in 2020 to 93.88 in 2021. But those estimates are up 1.5 Bcf/d and 3.05 Bcf/d, respectively, from the prior month's outlook.
The agency also substantially raised its gas price forecast for the second half of the year, reflecting an increase in demand for the fuel for power generation during a warmer-than-normal August and rising demand for U.S. LNG exports.
EIA's third-quarter forecast for Henry Hub natural gas spot prices rose 22 cents to $2.13/MMBtu and the fourth-quarter forecast also rose 30 cents from the previous month's estimates to $2.91/MMBtu. The agency estimated that Henry Hub prices will average $2.16/MMBtu for full-year 2020 and $3.19/MMBtu in 2021, up from the previous month's estimates of $2.03/MMBtu and $3.14/MMBtu, respectively.
LNG exports increasing
"U.S. [LNG] exports increased 19% from July to August amid rising global spot and forward prices, as the economy recovers and demand for natural gas increases," Capuano noted.
Amid improving netbacks for buyers of U.S. LNG in Europe and Asia for the fall and winter seasons, and a possible supply reduction in Australia, EIA is forecasting that U.S. exports will return to pre-coronavirus levels by November.
U.S. gas consumption estimates are above levels in the prior forecast, though still declining from 2019 levels. The agency raised its U.S. gas consumption estimates by 1.22 Bcf/d to 76.07 Bcf/d for the third quarter and by 30 MMcf/d to 84.54 Bcf/d for the fourth quarter.
"EIA estimates U.S. natural gas consumption will decrease 2.7% from 2019 to 2020, largely as a result of lower manufacturing activity and lower heating demand in early 2020," Capuano said. "We expect consumption to decline a further 4.3% in 2021 as higher natural gas prices reduce demand in the power sector."
U.S. electricity consumption is also projected to be 2.4% lower in 2020, compared with 2019 levels, amid declines in retail sales in the commercial and industrial sectors. Similar levels are expected in 2021.
Capuano noted that gas-fired generation continues to grow in the fuel mix, for now. It is expected to increase from 37% in 2019 to 39% in 2020 before declining to 34% in 2021 in response to higher gas prices, the said. The 2020 share for gas-fired generation was trimmed from forecasts in the July and August outlooks, however.
Maya Weber is a reporter with S&P Global Platts. S&P Global Market Intelligence and S&P Global Platts are owned by S&P Global Inc.