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EIA lowers spot gas forecasts for 2019 on robust production, storage injections


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EIA lowers spot gas forecasts for 2019 on robust production, storage injections

The U.S. Energy Information Administration on Jan. 15 lowered its spot natural gas price forecasts in 2019, predicting that production growth will keep pace with demand and export growth and that underground storage inventory builds will outpace the five-year average.

In its January "Short-Term Energy Outlook," the EIA lowered its forecast for first-quarter Henry Hub natural gas spot prices by 57 cents to $3.03/MMBtu and trimmed the second-quarter forecast by 13 cents to $2.73/MMBtu. The full-year 2019 price estimate fell 22 cents to $2.89/MMBtu, while the new 2020 estimate sees spot prices averaging $2.92/MMBtu.

The agency bumped up its natural gas consumption estimates in the U.S. by 1.46 Bcf/d to 99.4 Bcf/d for the first quarter and by 0.76 Bcf/d to 71.44 Bcf/d for the second quarter. "EIA forecasts power sector consumption of natural gas to remain largely unchanged in 2019 and then rise by 3.3% in 2020 because of continuing increases in natural gas-fired electric generation capacity," the agency said.

The EIA also raised its natural gas consumption estimate for the full year by 1.08 Bcf/d to 82.65 Bcf/d and forecast that consumption will average 83.55 Bcf/d in 2020.

Production is expected to build on the records set in 2018. "Permian and Appalachian regions will drive record U.S. production over the next 24 months," EIA Administrator Linda Capuano said in a statement.

The agency raised its natural gas marketed production estimate for the U.S. by 0.05 Bcf/d to 96.33 Bcf/d for the first quarter and by 0.08 Bcf/d to 97.23 Bcf/d for the second quarter. The full-year 2019 estimate rose by 0.19 Bcf/d to 97.28 Bcf/d, and 2020 levels were put at 99.68 Bcf/d.

While inventories were forecast to reach 1,405 Bcf at the end of March, 15% lower than the five-year average for that time, the EIA expected injections would exceed the average rate. Production is likely to outpace consumption in late March through October, the EIA said, which would bring inventories to 3,758 Bcf at the end of October, just above the five-year average.

The outlook forecast that natural gas exports will increase by more than 50% from 2018 to 2020. "EIA attributes this historic growth to LNG exports more than doubling over the same period and to new U.S. infrastructure coming online during 2019," Capuano said, noting that the U.S. will likely continue to be a net exporter in the coming years.

Exports, including pipeline exports and LNG, were forecast to increase by 31.5% to 13.2 Bcf/d in 2019 and then by 15.1% to 15.2 Bcf/d in 2020. LNG exports are seen rising from an estimated 3.0 Bcf/d in 2018 to 5.1 Bcf/d in 2019 and to 6.8 Bcf/d in 2020.

Natural gas is forecast to continue its ascent in the mix of electric generating resources, averaging a 36% share in 2019 and 37% in 2020, while coal declines, averaging 26% in 2019 and 24% in 2020.

Coal consumption in the power sector is forecast to drop by more than 90 million short tons over the next 24 months, Capuano said.

"For the first time in many years, EIA forecasts that total renewable generation at 19.6% will exceed nuclear generation at 18.7% in 2020," she added.

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.