Rising U.S. gas production supports storage refill, LNG exports

Friday, 01 June 2018

Marketed natural gas production – gross withdrawals minus gas used for repressuring reservoirs and quantities vented or flared – hit a record high of 78.9 Bcf/d in 2017 and monthly record high of almost 84.0 Bcf/d in December (see graph).

Anticipating U.S. natural gas production to rise again by 2.9 Bcf/d in 2019 to 83.3 Bcf/d, the EIA says it expects exports will keep rising as more liquefaction and export terminal are coming onsteam. US gas exports increased from 0.4 Bcf/d in 2017 to an annual average of 2.0 Bcf/d in 2018 and are seen to rise further to 4.6 Bcf/d in 2019.

In terms of gas storage, EIA weekly data shows natural gas inventories increased by 22 billion cubic feet in April, ending the month 27% below the five-year average for the end of April. “If confirmed, the April 2018 injection would be the smallest April injection since 1983,” report reads, explaining preliminary data indicates that April temperatures were the coldest for that month in the past 21 years, which contributed to low injections.

Based on EIA’s forecast of rising production, the agency noted “natural gas inventories should increase by more than the five-year average rate of growth during the current injection season (April–October) to reach more than 3.5 trillion cubic feet on October 31, which would be 8% lower than the five-year average for the end of October.”

Henry Hub natural gas spot prices are anticipated to average $3.01 per million British thermal units (MMBtu) in 2018 and $3.11/MMBtu in 2019. In April, Brent crude oil spot prices averaged $72/bbl, an increase of $6/bbl from the March level and the first time monthly Brent prices were exceeded the $70/bbl mark since November 2014. In 2018, Brent spot prices are forecast to average $71/bbl and $66/bbl in 2019.

The US West Texas Intermediate (WTI) crude oil prices, meanwhile, are forecast to average $5/bbl lower than Brent prices in both 2018 and 2019.