US Gas Prices to Remain Weak: EIA

The benchmark US natural gas price at Henry Hub averaged $2.37/mn Btu in July, the US Energy Information Administration (EIA) said August 6 in its Short-Term Energy Outlook (STEO), and by the end of July had fallen below $2.30/mn Btu.

With the summer price weakness and continuing forecasts of strong growth in gas production, the EIA has revised downward its 2H 2019 Henry Hub price forecast, to $2.36/mn Btu from $2.50/mn Btu in its July STEO. The benchmark price will rebound in 2020, to average $2.75/mn Btu for the year.

The agency is forecasting dry natural gas production in 2019 will average 91bn ft³/day, up from 83.4bn ft³/day in 2018, and while it expects monthly production rates will grow late this year, they will decline slightly in 1Q 2020 as the lagged effects of weaker prices later this year reduce gas-directed drilling. Production growth, however, will resume in 2Q 2020 as prices recover, the EIA said, and natural gas production is expected to average 92.5bn ft³/day next year.

The weaker natural gas prices, the EIA said, are expected to spur an increase in the total share of utility-scale generation in the US this year, to 37% from 34% in 2018, followed in 2020 by a slight decline. At the same time, lower costs for natural gas will push annual average wholesale electricity prices lower this year in all parts of the US, with declines ranging from 0.2% in the Southwest Power Pool to 28% in the Electric Reliability Council of Texas market.

Coal’s share of total US generation will average 24% this year and next, down from 28% in 2018, while non-hydro renewables will provide 10% this year, unchanged from 2018, but will increase to 12% in 2020. Nuclear’s share remains at 20% in 2019 and 2020, while hydro stays at 7% in 2019 and 2020, similar to its 2018 share.

Finally, US energy-related CO₂ emissions will decline by 2.3% this year and by 0.5% in 2020, after rising by 2.7% in 2018, the EIA said.