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US EIA lowers expected Q1 gas marketed production forecast by 1.08 Bcf/d to 95.25 Bcf/d

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The US Energy Information Administration onTuesday scaled back its first-quarter 2019 estimates for natural gas production and consumption, but continued to expect that record production over the next two years will take the edge off natural gas prices and allow gas to grow its share of the generation mix.

EIA, in its February Short-Term Energy Outlook, lowered its forecast for Q1 Henry Hub natural gas spot prices 6 cents to $2.97/MMBtu.The Q2 forecast also dropped 4 cents from the previous month to $2.69/MMBtu.

"Despite a cold snap in late January, average temperatures for the month were milder than normal in much of the country, which contributed to lower prices," the report said.

EIA Administrator Linda Capuano said the most recent outlook continues to predict record production in 2019 and 2020. "Outside of weather-related events, production growth is likely to keep average spot prices in check over the next 24 months as inventories track back toward recent five-year averages," she said.

The forecasted average 2019 price is estimated to be down 32 cents/MMBtu from the 2018 average. The agency estimated Henry Hub natural gas prices would average $2.83/MMBtu for full-year 2019 and $2.8/MMBtu in 2020, down from $2.89/MMBtu and $2.92/MMBtu estimated for those time periods a month earlier.

PRODUCTION ESTIMATE TRIMMED

The agency lowered by 1.08 Bcf/d to 95.25 Bcf/d its natural gas marketed production estimate for the US for Q1 and trimmed the Q2 forecast by 0.12 Bcf/d to 97.11 Bcf/d.

EIA estimates total marketed production will continue to grow, averaging 97.14 Bcf/d in 2019 and 99.68 Bcf/d in 2020, up from the 89.57/Bcf/d in 2018. The 2019 estimate is 0.14 Bcf/d lower than EIA's prior month estimate even as the 2020 forecast was up 0.29 Bcf/d.

The agency lowered its natural gas consumption estimates by 0.34 Bcf/d to 99.06 Bcf/d for Q1, but raised its Q2 estimate by 0.18 Bcf/d to 71.62 Bcf/d. For the full year 2019, the agency estimated gas demand will average 82.53 Bcf/d, down 0.12 Bcf/d from its forecast a month earlier.

FUEL MIX IMPLICATIONS

Amid low natural gas prices, coal consumption in the power sector is forecast to decrease over the next two years, Capuano noted.

EIA estimated gas will make up 36% of utility scale generation in 2019 and 37% in 2020, up from 35% in 2018. Over the same period, coal is seen dropping to 26% and 24%, from 28% in 2018. Assuming the forecast also holds for declining coal exports over the same period, both trends "will likely contribute to the long-term trend in decreasing US coal production," Capuano said.

Nuclear generation over the same period is seen staying near its 2018 level of 19% of the generating fuel mix. Wind, solar and other renewables are seen growing from 10% of the fuel mix in 2018 to 11% in 2019 and 13% in 2020. Wind's share of generation is expected to top that of hydropower for the first time in 2019, EIA said.

Energy-related CO2 emissions are seen declining again, by 1.3% in 2019 and 0.5% in 2020, after that downward trend was interrupted by a 2.8% rise in 2018 that EIA attributed to higher gas use associated with a colder winter and warmer summer that year. More normal temperatures are expected to support the decline in 2019 and 2020, EIA said.

-- Maya Weber, maya.weber@spglobal.com

-- Edited by Valarie Jackson, newsdesk@spglobal.com

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