Shale Daily

U.S. NatGas Production Again Forecast to Increase, Says EIA

The Energy Information Administration (EIA) revised its forecast for dry natural gas production from U.S. onshore basins to increase to an average of 73.7 Bcf/d this year, or 1.4 Bcf/d more than in 2016, according to its September Short-Term Energy Outlook (STEO).

That’s up slightly from last month’s estimate, when the EIA expected dry gas production to average 73.5 Bcf/d this year. Next year’s U.S. natural gas production is currently forecast to be 78.1 Bcf/d, up from the previous estimate of 77.34 Bcf/d.

Hurricane Harvey, which pummeled the nation’s largest energy complex along the Texas Gulf Coast late last month and affected the entire supply chain, threw a wrench into this month’s STEO, EIA said.

“At the time of publication, continuing uncertainty exists regarding the timeline for the return to normal operations for a broad range of upstream production, refining, pipeline, and terminal and distribution infrastructure,” the agency said. “The severity and duration of these outages create additional uncertainty about the path of energy prices in the coming weeks and months.”

Average Henry Hub natural gas prices were $2.90/MMBtu in August, down 8 cents from the July level. Natural gas exports and domestic consumption, however, are still expected to drive year/year increases in 2018. This year’s average changed little from the August STEO when EIA forecast prices to average $3.06/MMBtu for 2017. EIA expects the average Henry Hub price to be $3.29/MMBtu next year, compared to the $3.05/MMBtu it now expects in 2017.

Natural gas prices traded within a relatively narrow range for most of August, “as supply and demand factors kept the market in relative balance,” EIA said. August ended with natural gas storage inventory levels 0.5% higher than the five-year average. Most of the Lower 48, EIA said, experienced temperatures close to normal or cooler than normal, which reduced cooling degree days and the need for air conditioning.

EIA also expects the share of U.S. electricity generation from natural gas to fall from an average of 34% in 2016 to about 31% this year as a result of higher prices and more generation from renewables and coal. Coal’s forecast generation share rises from 30% last year to 31% in 2017, according to the STEO. In 2018, natural gas and coal are expected to generate 31% and 32% of the nation’s electricity, respectively.

U.S. crude production is estimated to have averaged 9.2 million b/d in August, down about 40,000 b/d from July. Gulf of Mexico (GOM) crude production fell to a monthly average of 1.6 million b/d last month, down by 70,000 b/d from the July level. But EIA said many GOM oil production platforms have returned to operation after they were forced by Harvey to shut down.

EIA is forecasting U.S. crude oil production to average 9.3 million b/d this year and 9.8 million b/d in 2018, which would mark the highest annual average production in U.S. history and break the record of 9.6 million b/d set in 1970. 

 

 

 

 

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