Surging domestic production again prompted the Energy Information Administration (EIA) to lower its Henry Hub spot price average for 2020, and the crude forecast also moved lower on a weakening global economy. 

The Henry Hub spot price is forecast to average $2.55/MMBtu next year, according to the latest Short-Term Energy Outlook (STEO), 20 cents less than EIA’s August forecast. Benchmark prices averaged $2.22/MMBtu in August, down 15 cents from July, but they crept up in the second half of the month. EIA now expects gas prices to average $2.44/MMBtu in 4Q2019. In August, the agency had projected prices would average $2.36/MMBtu through the second half of the year.

Despite high levels of gas exports and record power burn this summer, EIA said prices have declined mainly because of rising production that’s easily meeting demand. Gas for power generation hit new heights in July of about 44.5 Bcf/d, while liquefied natural gas (LNG) exports averaged 3.9 Bcf/d in August. EIA expects LNG exports to continue rising to average 6.4 Bcf/d next year.

U.S. gas production is forecast to average 91.4 Bcf/d this year, up by 8 Bcf/d from 2018. Monthly average gas production is likely to grow in late 2019 and then decline slightly during 1Q2020 as the impact of gas prices helps to curb volumes. However, EIA expects production to pick up in 2Q2020, with next year’s volumes estimated to average 93.2 Bcf/d.

As a result of increasing production, EIA said gas storage injections have outpaced the five-year (2014-2018) average this season. Gas storage levels are predicted to be 3,769 Bcf by the end of October, which is slightly higher than the five-year average and 16% higher than October 2018 levels.

Natural gas producers have felt the squeeze, but a slump in oil prices could deepen the pain for the rest of the market as well. Many onshore producers operating in wetter basins have already cut spending on volatile commodity prices. Other forecasters have also lowered their price decks for both oil and gas through next year.

EIA forecast an average West Texas Intermediate (WTI) price of $56.31/bbl for this year, a decrease of 2.7% from August. The WTI price in 2020 is projected to average $56.50 or a 5% decrease from the August STEO.

EIA also slashed its forecast for global benchmark prices, projecting a Brent crude average of $63.39/bbl this year and $62.00 in 2020, down 2.7% and 4.6%, respectively, from the previous forecasts.

Global economic indicators are declining, EIA said. Oil prices have fluctuated, and lower demand prompted EIA to lower its crude forecasts. EIA also noted that WTI prices fell by 2% last month when China announced a 5% tariff on U.S. crude imports in the trade war’s latest salvo.