US EIA lifts forecasts for 2021-22 natural gas and power consumption

Washington — Higher forecasted crude oil prices and an assumptions of an improved US economic outlook prompted the Energy Information Administration March 9 to boost its forecasts for natural gas production and consumption, despite the February freeze that crimped production in the first quarter of 2021.

In its March Short-Term Energy Outlook, the agency also raised its forecast for US electricity consumption in 2021 by 2.1%, citing colder temperatures in the first quarter compared with the 2020 season.

While EIA lowered its Q1 total marketed gas production forecast by 710 MMcf/d to 97.97 Bcf/d, it raised the estimate for Q2, by 630 MMcf/d to 98.58 Bcf/d, as well its forecasts for the 2021 and 2022 averages, up 610 MMcf/d to 98.95 Bcf/d and 1.7 Bcf/d to 100.63 Bcf/d, respectively.

The agency attributed Q1 dry gas production declines mostly to February freeze-offs, but looking ahead raised its forecast for overall dry gas production to 91.4 Bcf/d in 2021, or 900 MMcf/d more than its previous STEO estimate.

"The higher forecast largely reflects higher forecast crude oil prices, which EIA expects will contribute to more associated natural gas production," the outlook said.

The agency estimated that gas consumption in February was the highest on record, at 111.8 Bcf/d, as cold weather blanketed much of the US, driving up demand for heating and power generation.

As such, the agency raised gas consumption estimates by 3.66 Bcf/d to 102.6 Bcf/d for Q1, and forecast that gas storage inventories at the end of March would be 13% less than the five-year average. It also forecast that inventories would end the 2021 injection period at almost 3.7 Tcf, or 2% lower than the five-year average.

"February saw one of the largest monthly working natural gas storage withdrawals on record in the United States, including a record withdrawal of 156 Bcf in Texas's South Central region," said EIA Acting Administrator Steve Nalley in a statement discussing the report.

EIA also raised gas consumption estimates for Q2 by 180 MMcf/d to 70.25 Bcf/d. It forecast that industrial consumption of gas will rise to 23.8 Bcf/d in 2021, up 800 MMcf/d from February's outlook, reflecting improved economic conditions.

Forecasts for yearly consumption averages were also up from the prior outlook, by 810 MMcf/d to 82.52 Bcf/d in 2021 and by 590 MMcf/d to 81.6 Bcf/d in 2022. Those forecasts were still below the 83.25 Bcf/d EIA said was consumed in 2020.

Higher Q1 spot prices

Looking to gas prices, the agency expected that continued growth in LNG exports, along with relatively flat production would help push spot prices to average $3.16/MMBtu in 2022.

EIA raised its forecast for Q1 Henry Hub natural gas spot prices by 79 cents to $3.64/MMBtu. The Q2 forecast stayed flat at $2.88/MMBtu.

The agency projected Henry Hub spot prices would average $3.14/MMBtu for full-year 2021 and $3.16/MMBtu in 2022, compared with the previous month's estimates of $2.95/MMBtu in 2021 and 3.27/MMBtu in 2022.

EIA said LNG exports averaged 7.5 Bcf/d in February, down 23% from the prior month's estimates, on logistical constraints, inclement weather and lower feedstocks, which were affected by extreme cold.

"EIA expects US LNG exports to continue their seasonal decline from March through May, averaging 7.8 Bcf/d in this period," the report said.

Uptick for coal in generation mix

After rising 2.1% in 2021, US electricity consumption was expected to grow another 1.4% in 2022, the EIA said, compared with the 3.8% decline in 2020.

With extreme cold boosting gas prices in Q1 this year, the EIA raised its forecast for coal-fired generation in 2021 by 6% to 887 billion kWh.

And coal's share of the US generating fuel mix was forecast to average 23% in both 2021 and 2022, growing from 20% in 2020.

Gas-fired generation was seen making up 36% of the generating fuel mix in 2021, and 35% in 2022, dampened by a 44% forecast rise in the price of gas delivered to power generators between 2020 and 2021.

The agency expected renewables to continue their rise, reaching 21% of the generation mix in 2021 and 23% in 2022, while nuclear declines to 20% in 2021 and 19% in 2022.