US LNG to fulfil its role as outlet for gas glut amid static domestic consumption and falling production
Higher global prices indicate improving netbacks for buyers of US LNG in European and Asian winter season markets with shipments rising as the industry fulfils its role as an outlet for domestic natural gas amid falling consumption and production.
The increased prices come amid expectations of natural gas demand recovery and potential LNG supply reductions because of maintenance at overseas plants, according to the short-term energy outlook of the US Energy Information Administration.
The EIA forecasts that US LNG exports will average more than 9.0 billion cubic feet per day from December 2020 through February 2021.
The report said that the cargo shipments, mostly from the Gulf Coast, averaged 4.9 Bcf per day in September, an increase of 1.2 Bcf per day from August.
Consumption of domestic natural gas is expected to decline slightly and will average 83.7 Bcf per day in 2020, down 1.8 percent from 2019.
“The decline in total US consumption reflects less heating demand in early 2020, contributing to residential and commercial demand in 2020 averaging 13.1 Bcf per day (down 0.7 Bcf per day from 2019) and 8.7 Bcf per day (down 0.9 Bcf per day from 2019), respectively,” said the report.
It forecasts industrial consumption will average 22.3 Bcf per day in 2020, down 0.8 Bcf per day from 2019 as a result of reduced manufacturing activity.
“EIA expects total US natural gas consumption will average 78.7 Bcf per day in 2021, a 5.9 percent decline from 2020,” said the report.
“The expected decline in 2021 is the result of rising natural gas prices that will reduce demand for natural gas in the electric power sectors,” it added.
Dry natural gas production will average 90.6 Bcf percent in 2020, down from an average of 93.1 Bcf per day in 2019.
In the forecast, monthly average production falls from a record 97.0 Bcf per day in December 2019 to 85.9 Bcf per day in May 2021, before increasing slightly.
“Natural gas production declines the most in the Permian region, where EIA expects low crude oil prices will reduce associated natural gas output from oil-directed rigs,” said the report.
Dry natural gas production in the US is expected to average 86.8 Bcf per day in 2021.
On the storage front, the EIA estimated that total working natural gas in storage at the end of September was at more than 3.8 trillion cubic feet, 12 percent more than the five-year (2015-2019) average.
In the forecast, EIA expects inventories to be more than 4.0 Tcf on October 31, which would be a record high.
“However, because expected natural gas production will be lower this winter than last winter, EIA forecasts inventory draws will outpace the five-year average during the heating season and end March 2021 at 1.7 Tcf, which would be 6 percent lower than the 2016-2020 average,” it added.
As regards energy-related carbon dioxide (CO2) emissions, after falling by 2.6 percent in 2019 from the previous year’s level, the emissions will decrease by 10 percent (536 million metric tons) in 2020 as a result of reduced consumption of all fossil fuels.
