Natural gas prices declined this summer, fighting off upward pressure posed by the growing volume of LNG exports and high power sector consumption of the fuel, and driving forecasts for generally lower wholesale electricity prices across the country in 2019, the U.S. Energy Information Administration said Sept. 10.
The agency, in its September "Short-Term Energy Outlook," put third-quarter Henry Hub natural gas spot prices at $2.31/MMBtu, up 2 cents from its August estimate. The fourth-quarter forecast inched up 1 cent from the prior month to $2.44/MMBtu.
With monthly average prices expected to remain below $2.50/MMBtu through the end of 2019, the agency put the full-year 2019 average spot price at $2.56/MMBtu, up 1 cent from the prior month's estimate.
In a Sept. 10 statement, EIA Administrator Linda Capuano noted that prices are forecast to "rise slightly into 2020, averaging $2.55/MMBtu for the year."
That forecast for 2020 is 20 cents lower than the prior month's estimate "based on recent price movements and EIA's assessment that natural gas production will be sufficient to meet expected demand and export levels at a lower price than previously forecasted," the agency said in its outlook.
The agency expects natural gas to fuel 37% of utility-scale electricity generation in 2019 and nearly 38% in 2020. As such, low natural gas costs are contributing heavily to forecasts that wholesale electricity prices in 2019 will be lower than 2018's prices in every region tracked by the EIA except for the Electric Reliability Council of Texas.
The lower forecast power prices reflect a 9% drop in the average U.S. cost of natural gas delivered to power generators in the first half of 2019 compared with the same period in 2018, and estimates that the second half of 2019 will see the delivered cost of natural gas drop 31% from the same year-ago period.
Capuano attributed low natural gas prices to U.S. gas production remaining on pace for another record year. The EIA's estimate for dry natural gas production in 2019 is 91.39 Bcf/d, a 9.6% increase over output in 2018.
"EIA expects monthly average natural gas production to grow in late 2019 and then decline slightly during the first quarter of 2020 as the lagged effect of low prices in the second half of 2019 reduces natural gas-directed drilling," the September outlook said. "However, EIA forecasts that growth will resume in the second quarter of 2020, and natural gas production in 2020 will average 93.2 Bcf/d."
Thus, the EIA raised its third-quarter natural gas marketed production estimate by 0.41 Bcf/d to 99.07 Bcf/d, and boosted its fourth-quarter forecast by 0.44 Bcf/d to 100.77 Bcf/d.
The EIA also lifted its full year 2019 and 2020 marketed production estimates by 0.34 Bcf/d and 0.67 Bcf/d, respectively, to 98.4 Bcf/d and 100.55 Bcf/d. The forecast highlights slowing production growth as output is expected to jump 9.7% between 2018 and 2019 but only grow 2.2% from 2019 to 2020.
The agency lowered its gas consumption estimate 0.47 Bcf/d to 76.08 Bcf/d for the third quarter but raised the estimate for the fourth quarter by 0.21 Bcf/d to 89.28 Bcf/d.
Similarly, the EIA's demand forecast for full-year 2019 declined 0.14 Bcf/d to 84.51 Bcf/d, while the 2020 estimate was up 1.38 Bcf/d to 85.34 Bcf/d.
The slight rise in gas demand year over year tracks with expected bumps in gas consumption by the power and industrial segments, the largest gas-consuming sectors in the U.S.
Jasmin Melvin 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.
