The U.S. Energy Information Administration on Dec. 10 docked its Henry Hub spot natural gas price forecasts for the fourth quarter and the start of the new year, predicting that sustained high production levels will keep prices in 2020 below 2019 levels.

The agency, in its December "Short-Term Energy Outlook," lowered its forecast for fourth-quarter Henry Hub natural gas spot prices by 8 cents to $2.52/MMBtu and its first-quarter 2020 forecast by 11 cents from the November estimate to $2.62/MMBtu.

While a colder-than-average November pushed Henry Hub prices up to $2.64/MMBtu, the "EIA expects U.S. benchmark Henry Hub spot prices to average $2.45/MMBtu in 2020, down 14 cents from the 2019 average, as U.S. production continues at a record level," EIA Administrator Linda Capuano said.

The EIA does expect dry gas production growth to slow in 2020 because of "the lag between changes in price and changes in future drilling activity," she noted. Low prices in the third quarter will cut natural gas-focused drilling in the first half of 2020, the outlook said, forecasting that dry gas production would average 95.1 Bcf/d in 2020. The administration expects 2019's dry gas production will average 92.1 Bcf/d, representing a 10% increase over the preceding year.

The outlook lowered its fourth-quarter total marketed production forecast by 170 MMcf/d to 102.59 Bcf/d and raised its first-quarter 2020 estimate by 280 MMcf/d to 102.2 Bcf/d. For the full year of 2019, the EIA estimated that total marketed production would average 98.99 Bcf/d, down 50 MMcf/d from its November forecast. For 2020, the EIA raised its estimate by 210 MMcf/d, to 102.33 Bcf/d.

Amid these expected production fluctuations, the EIA's forecast reflects an increase in expected consumption. The EIA raised its gas consumption estimates by 1.71 Bcf/d to 92.51 Bcf/d for the fourth quarter and by 2.14 Bcf/d to 104.54 Bcf/d for the first quarter of 2020. For full-year 2020, gas consumption is estimated to average 87.18 Bcf/d, up 730 MMcf/d from the administration's November estimate and rising from the 85.78 Bcf/d estimated for 2019.

Total working gas inventories at the end of November were nearly 3.62 Tcf, about equal to the five-year average. But looking ahead, the EIA anticipates that lower than five-year-average withdrawals from the end of October to the end of March are expected to leave end-of-March inventories at 1.9 Tcf, or 8% higher than the five-year average.

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.