The US Energy Information Administration April 6 bumped up its US natural gas consumption forecasts for the rest of 2021, even as it predicted a slight decline in average US gas demand in 2021 amid lower use of the fuel in the power sector.
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EIA, in its April Short-Term Energy Outlook, raised its gas consumption estimates by 1.53 Bcf/d to 71.78 Bcf/d for the second quarter of 2021, and by 1.65 Bcf/d to 73.61 Bcf/d for Q3.
"EIA expects that consumption of natural gas will decrease in the United States in 2021 by less than 1%," said Acting Administrator Steve Nalley in a statement coinciding with the report's release. "Although we expect that natural gas consumption in residences, by commercial establishments and by industry will all increase, the slight decrease in overall consumption in 2021 is the result of less consumption used to generate power because of higher natural gas prices," he said.
Residential and commercial gas consumption is forecast to rise by a total of 1.1 Bcf/d from 2020 in the outlook, while industrial use is seen climbing 1.4 Bcf/d.
"Rising consumption outside of the power sector results from expanding economic activity and colder temperatures in 2021 compared with 2020," said the outlook. It forecast that total US gas consumption will average 82.93 Bcf/d in 2021 and 82.07 Bcf/d in 2022, down from 83.26 in 2020.
Elsewhere, EIA's outlook mostly trimmed the agency's near-term spot gas price and production estimates.
The forecast for Q2 Henry Hub spot prices fell by 15 cents to $2.73/MMBtu, compared to the prior month's estimates, and the Q3 estimate was down 10 cents to $2.89/MMBtu.
"Cold weather and market disruptions in February resulted in US benchmark Henry Hub natural gas spot prices averaging $5.35/MMBtu," said Nalley, while in March the average price was back down to $2.62/MMBtu.
The agency projected Henry Hub natural gas prices would average $3.04/MMBtu for full-year 2021 and grow to $3.11/MMBtu in 2022, well above the 2020 average of $2.03/MMBtu. Those estimates are lower, however, than the previous outlook's estimates of $3.14/MMBtu in 2021 and $3.16/MMBtu in 2022.
"We expect that continued growth in LNG exports, with only a slight corresponding increase in dry natural gas production, will contribute to the average Henry Hub spot price rising to $3.11/MMBtu in 2022," the report said.
EIA lowered by 260 MMcf/d to 98.32 Bcf/d its total natural gas marketed production estimate for the US in Q2, and pared back its Q3 production forecast by 240 MMcf/d to 99.12 Bcf/d. The 2022 estimate is up 390 MMcf/d to 101.02 Bcf/d, however, compared with the previous outlook.
"In our forecast, dryngas production falls to a low point of 90.8 Bcf/d in May 2021 before steadily increasing through most of the remainder of 2021, reaching a high of 92.4 Bcf/d in November 2021," the outlook said. "The increase in production in 2021 reflects higher forecast natural gas prices as well as higher forecast crude oil prices, which we expect will contribute to more associated natural gas production, especially in the Permian region."
While EIA estimated that gas inventories ended March 2021 at 1.8 Tcf, or 2% below the five-year average, it forecast that injections would outpace the five-year average in 2021, due to rising production and lower consumption for generation. Inventories are seen ending the injection season at more than 3.7 Tcf, equal to the five-year average.
On the power side, EIA forecast that consumption would rise again, after falling 3.8% in 2020.
"Colder temperatures in the first quarter of 2021 along with expectations of continuing economic growth contribute to EIA's forecast 2.1% increase in US electricity consumption in 2021, Nalley said. Electricity consumption is seen rising another 1.4% in 2022.
The agency continued to predict that higher gas prices will drive a shift in the fuel mix for the power sector in 2021.
"Our April STEO forecasts that natural gas will fuel about 36% of utility-scale electricity generation, which is down 3% from 2020," according to Nalley.
Coal's share, conversely, is forecast to rise from 20% in 2020 to 22% in 2021, while generation from renewables increases from 20% to 21% over that period. Nuclear power is declining from 21% in 2020 to 20% in 2021 and 19% in 2022.
The agency forecasts continued growth in renewables, with additions of 16.1 MW of wind capacity in 2021 and 5.8 GW in 2022, compared with 14.5 GW added in 2020. Utility-scale solar capacity is seen adding 15.8 GW in 2021 and 14.9 GW in 2022, up from 10.4 GW added in 2020.