Prepared for Einars | Delivered August 8, 2019
Natural Gas U.S. Supply & Demand Outlook
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To understand the actual fundamentals of the U.S. natural gas market, including supply, demand, prices and market outlook or forecasts.
Natural gas prices in the U.S. have been falling
since April 2019
after a slow increase during the previous months.
for Natural Gas pricing in the U.S., the Henry Hub, has averaged
British thermal units (MMBtu) last month, a fall of 3 cents compared to June.
It fared even worse by the end of July, falling below
According to EIA forecasts, production will remain strong in 2019, and the government agency predicts that the price for the second half of 2019 will average
In its July short-term report, the EIA expected prices to average $
during the same period.
For 2020, EIA predicts an average price of
According to the model used by the EIA, prices
will have to rise
to encourage supply and avoid an imbalance with growing domestic demand and rising export volume requirements.
In Mid-July, Jefferies reduced their natural gas price forecast for 2019 from
$2.88 to $2.70
and their longer-term forecast from
$3 to $2.75.
According to Jefferies, a price of
would encourage companies to drill and raise production.
According to Tudor, Pickering, Holt & Co. analysts, natural gas prices in the U.S. will remain
per MMBtu as long as U.S. oil prices remain above $50 a barrel. The latter has increased by
27% in 2019.
Most analysts have a bearish view of gas prices, and a survey targeting oil and gas executives reported a prediction of an end-of-year price of
or 10% less than predictions made in early 2019.
The Energy Information Administration (EIA) is forecasting an increase in dry natural gas production in 2019 compared to 2018, with an average of
cubic feet (Bcf) per day, a growth of 7.8 Bcf/day compared to 2018.
The EIA expects to see average
monthly domestic supply growth
in late 2019 followed by a slight fall during Q1 2020, caused by a lagged effect of low prices during Q2 2019 reducing drilling for natural gas in the U.S.
Growth in supply is expected to happen again during Q2 2020 with an average o
f 92.5 Bcf/day e
xpected for 2020.
Appalachia is becoming the country's
top producer of natural
gas, whereas gas is mainly produced as a by-product of oil drilling in West Texas, which adds to the supply glut.
The EIA raised their demand forecast for 2019 from 84.59 Bcf/day to
a day. Previously, the highest level of consumption recorded reached
y in 2018.
As demand for natural gas in the summer is usually related to cooling needs, it will be affected by cooler than normal weather expected over the
next two weeks.
Low prices have encouraged
natural gas-fired electricity
generation during summer 2019, which contributed to reducing the cost of electricity throughout the country.
Every Thursday, the Department of Energy releases a natural gas
Natural gas inventory in the U.S. is expected to rise b
y 57 Bcf
Inventories increased by
65 Bcf last week,
as analysts expected only a 42 Bcf increase.
At the end of July, inventories reached
2.7 trillion cubic feet
(Tcf), which was 13% more than in July 2018, but still 4% lower than the 5-year average.
The EIA predicts that inventory growth in the April-October season will be superior to the 5-year average and reach over
at the end of October, a figure 16% higher than October 2018 and a little superior to the 5-year average.