The US Energy Information Administration on Tuesday boosted its natural gas production estimates for the rest of 2018 and for 2019, while expecting prices to remain in check for much of the period even as consumption forecasts rose, but to a lesser degree than production.
The agency, in its November Short-Term Energy Outlook, raised its US gas marketed production estimate for the fourth quarter of 2018 by 1.83 Bcf/d to 94.32 Bcf/d. The agency's Q1 2019 forecast also climbed 2.20 Bcf/d to reach 95.78 Bcf/d.
"The November outlook revises the forecast up for US dry natural gas production in 2019, while the forecast for 2018 increased modestly," said EIA Administrator Linda Capuano. "In both cases, US dry natural gas production is poised to set new records in 2018 and 2019 -- exceeding an average of 80 Bcf/d this year and approaching 90 Bcf/d next year."
Consumption estimates also saw significant gains. EIA raised its US gas consumption estimates by 0.95 Bcf/d to 83.22 Bcf/d for Q4 and 1.52 Bcf/d to 98.34 Bcf/d for Q1 2019. The full-year estimate was up 0.53 Bcf/d to 81.11 Bcf/d for 2018, and up 1.33 Bcf/d to 81.75 Bcf/d for 2019.
Prices
Despite tighter gas storage inventories going into the heating season, EIA expected strong growth in production to put pressure on prices in 2019.
The outlook predicts Henry Hub prices will average $2.98/MMBtu in 2019, down 4 cents from the 2018 average and from a forecasted average price of $3.25/MMBtu in Q4 2018. The 2019 estimate is 14 cents below the forecast EIA put forward a month earlier.
In the shorter term, EIA raised its forecast for the Q4 Henry Hub spot gas price by 10 cents to $3.25/MMBtu, but lowered its Q1 2019 forecast by 8 cents from the previous month's estimate to $3.16/MMBtu.
"US natural gas storage inventories started the 2018 winter heating season about 16% below last year's inventory levels for October 2017, as well as 16% below the five-year average, according to the November outlook," Capuano said. "Record consumption in recent months prevented recovery from early summer deficits, as natural gas continues to increase its share of the electricity generation fuel mix."
The agency noted that Henry Hub front-month gas futures prices for November 1 rose 14 cents from October 1, buoyed by high power demand in some areas in early October, early cold in other parts of the US and nuclear outages.
"The higher demand helped to keep storage levels low heading into the winter," supporting prices, the outlook said.
Generation
On the electric power side, the agency expected that gas would continue gaining ground in utility-scale electric generation, averaging 35% of the mix in 2018 and 36% in 2019, up from 32% in 2017. Coal continues to decline in EIA's forecast, averaging 28% of the stack in 2018 and 26% in 2019, down from 30% in 2016. Nuclear generation was seen averaging about 19% in 2018 and 2019, down from 20% in 2017.
"Solar electricity generation remains the fastest-growing renewable energy source," Capuano said. "The data suggest that the solar industry is increasing its use of solar PV tracking systems because revenues from the tracking systems more than offset their increased costs, when compared to fixed-tilt panels."
Carbon dioxide emissions, which had been declining, are expected to rise 2.5% in 2018, reflecting higher gas consumption because of a colder winter and warmer summer than a year earlier. But a decline of 1.3% is expected again in 2019 as temperatures are forecast to return to normal, EIA said.
