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    EIA Sees Weaker Gas Prices, Production


Some recovery in prices expected in 2Q and 3Q

by: Dale Lunan

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EIA Sees Weaker Gas Prices, Production

The US Energy Information Administration (EIA), in its latest Short-Term Energy Outlook released February 11, projects natural gas commodity prices will remain weak through the next two months, while dry gas production will soften through the balance of the year.

Warm weather exerted downward pressure on commodity prices through January, and for the month, the benchmark Henry Hub price averaged just $2.02/mn Btu, the EIA said. By early February, the Henry Hub spot price had fallen to $1.86/mn Btu and it is expected to remain below $2.00/mn Btu through February and March.

Some price recovery should begin in 2Q 2020, the EIA says, as gas production declines and demand for power generation picks up. With this recovery, the EIA projects the Henry Hub price to average $2.36/mn Btu in 3Q 2020 and $2.20/mn Btu for the year before jumping to $2.53/mn Btu in 2021.

Although US dry natural gas production averaged a record 92.1bn ft3/day in 2019 and is forecast by the EIA to average 94.2bn ft3/day through all of this year, the agency is projecting average monthly production will decline steadily through 2020, from 95.4bn ft3/day in January to 92.5bn ft3/day in December.

Production declines will be most prevalent in the Appalachian basin, where weak natural gas commodity prices will discourage gas-directed drilling, and in the Permian basin, where weak crude oil prices will reduce associated gas production from oil-directed wells.