EIA: Lower US gas prices expected in 2020

Nov. 13, 2019
The Henry Hub natural gas spot price averaged $2.33/MMbtu in October, down 23¢/MMbtu from September. In its latest Short-Term Energy Outlook, the US Energy Information Administration noted that the decline largely reflected strong inventory injections.

The Henry Hub natural gas spot price averaged $2.33/MMbtu in October, down 23¢/MMbtu from September. In its latest Short-Term Energy Outlook, the US Energy Information Administration noted that the decline largely reflected strong inventory injections. However, forecast cold temperatures across much of the country caused prices to rise in early November, and EIA forecasts Henry Hub prices to average $2.73/MMbtu for the final 2 months of 2019.

In this month’s STEO report, EIA forecasts Henry Hub spot prices to average $2.48/MMbtu in 2020, down 13¢/MMbtu from the 2019 average. Lower forecast prices in 2020 reflect a decline in US gas demand and slowing gas export growth, allowing inventories to remain higher than the 5-year average during the year even as gas production growth is forecast to slow.

EIA forecasts that annual US dry gas production will average 92.1 bcfd in 2019, up 10% from 2018. EIA expects that gas production will rise much less in 2020 because of the lag between changes in price and in future drilling, with low prices in this year’s third quarter reducing gas-directed drilling in the first half of 2020. EIA forecasts gas production in 2020 will average 94.9 bcfd.

EIA expects US LNG exports to average 4.7 bcfd in 2019 and 6.4 bcfd in 2020 as several new liquefaction projects come online.

This year, three new liquefaction facilities—Cameron LNG, Freeport LNG, and Elba Island LNG—commissioned their first trains. Gas deliveries to LNG projects set a new record in July, averaging 6 bcfd, and increased to 6.6 bcfd in October when new trains at Cameron and Freeport began to ramp up.

Cameron LNG exported its first cargo in May, Corpus Christi LNG’s newly commissioned Train 2 in July, and Freeport in September. Elba Island plans to ship its first export cargo by yearend. In 2020, Cameron, Freeport, and Elba Island expect to place their remaining trains in service, bringing the total US LNG export capacity to 8.9 bcfd by yearend.

US gas storage injections outpaced the previous 5-year (2014–18) average during the 2019 injection season as a result of rising production.

At the beginning of April, when the injection season started, working inventories were 28% lower than the 5-year average for the same period. By Oct. 31, US total working gas inventories reached 3,762 bcf, which was 1% higher than the 5-year average and 16% higher than a year ago.

In this month’s STEO, EIA expects gas storage withdrawals to total 1.9 tcf between the end of October and the end of March, which is less than the previous 5-year average winter withdrawal. A withdrawal of this amount would leave end-of-March inventories at almost 1.9 tcf, 9% higher than the 5-year average.