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    EIA Lifts 2021 Forecast for US Gas Demand


Rising prices will make gas less competitive in the power sector.

by: Joe Murphy

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EIA Lifts 2021 Forecast for US Gas Demand

The US Energy Information Administration (EIA) has raised its forecast for US gas consumption in 2021 by 1.7%, it said on January 12, although demand will still be lower than last year.

The agency now expects demand to average 80.73bn ft3/day during the year, it said in its short-term outlook report, versus a previous forecast of 79.4bn ft3/d made a month ago. However, consumption will still be 2.8% lower than in 2020 when it averaged 83.06bn ft3/d, which also represented a year/year decline of 2.5%. Breaking down this year, the EIA expects consumption to average 97.86bn ft3/d in Q1 and then fall to 68.54bn ft3/d in Q2, before recovering to 71.75bn ft3/d in Q3 and 85.02bn ft3/d in Q4.

Demand will shrink by a further 2.1% in 2022 to 79.03bn ft3/d, the EIA said. The agency attributed the downward trend to rising gas prices, leading to reduced gas use in power generation, although this will partially be offset by increased use in other sectors. The cost of gas delivered to power generators was just $2.37/mn Btu in 2020, according to the EIA, but will surge by 41% in 2021 to $3.35/mn Btu, and by a further 8.9% in 2022.

As a result, the share of gas in power generation will contract to 36% in 2021 and 34% in 2022, eradicating the gains made over the last two years. Higher gas prices mean coal will claw back some market share, with its share of the mix expanding from 20% in 2020 to 22% in 2021 and 24% in 2022. Renewables will also see expanded use, with their share increasing from 20% in 2020 to 21% in 2021 and 23% in 2022.

The EIA is bullish on US gas exports, forecasting them to recover from 6.5bn ft3/d in 2020 to 9.8bn ft3/d in 2021 and 10.7bn ft3/d in 2022. LNG exports soared to another record level in December of 9.8bn ft3/d, on the back of unusually low temperatures in key Asian markets.