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Rising natural gas production seen capping price recovery in 2018

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Rising natural gas production seen capping price recovery in 2018

Natural gas prices are expected to continue higher in 2018 but will likely face pressure from a big increase in production, according to the Energy Information Administration's latest "Short-Term Energy Outlook" released Dec. 12.

"Expected growth in natural gas exports and domestic natural gas consumption in 2018 contribute to an increase in EIA's forecast from an annual average of $3.01/MMBtu in 2017 to $3.12/MMBtu in 2018," the agency said in the report.

The EIA forecasts that total U.S. natural gas consumption will slide to an average of 73.7 Bcf/d in 2017, down from 75.1 Bcf/d in 2016, but will recover to almost 76.9 Bcf/d in 2018.

U.S. gross exports should continue to rise, reaching an average 8.7 Bcf/d in 2017, up from 6.4 Bcf/d in 2016, and called to rise to more than 10 Bcf/d in 2018, according to EIA estimates.

However, increased production will help meet the rising demand and exports. U.S. dry natural gas production is forecast to average near 73.5 Bcf/d in 2017, a 0.7 Bcf/d increase from the 2016 level, before jumping 6.1 Bcf/d year on year to 79.7 Bcf/d in 2018.

The agency said Henry Hub natural gas spot prices averaged $3.01/MMBtu in November, up nearly 14 cents from October, and should continue to rise to an average $3.13/MMBtu in December.

Driving prices in November, the EIA pointed to inventories dropping further below the five-year average in recent weeks until a rare injection into storage for the week ending Dec. 1 brought inventories up to just 36 Bcf shy of the five-year average.

At the same time, "increased takeaway capacity from Appalachia is expected to result in increased natural gas production in the coming months and could limit significant upward price pressure, although colder-than-normal temperatures throughout the rest of 2017 could contribute to price increases," the agency noted.