LNG News Editor:
The US government’s short-term energy report for June forecasts declines in natural gas production in the Haynesville and Appalachia shale basins before a rebound in 2025 backed by higher benchmark Henry Hub gas prices, while also forecasting annual record production in 2024 and 2025 for US crude oil.
“Marketed natural gas production in the Haynesville region in our forecast falls by 9 percent this year and production in the Appalachia region falls by 4 percent,” said the US Energy Information Administration in its June Short-Term Outlook.
“The forecast declines are partly offset by growth of 4 percent in the Permian region, largely because most of the natural gas produced in the Permian is associated with oil production,” explained the EIA Outlook.
“We forecast US marketed natural gas production will increase by 2 percent next year, with growth in all three of these regions, as natural gas prices rise in our forecast,” stated the report.
Henry Hub pressure
The EIA expected the drop in US natural gas production in 2024 would continue to put upward pressure on the Henry Hub natural gas spot price.
“We expect that the Henry Hub spot price will average $2.50 per million British thermal units (MMBtu) this year, 13 percent higher than we expected last month, with prices rising from $2.12/MMBtu in May to $3.30/MMBtu in December 2024,” the report explained.
The EIA also pointed out that the June Outlook had new natural gas production data tables, providing more data and analysis for US marketed natural gas production by region in the Lower 48 states.
The data includes historical and forecast production for the Appalachia, Bakken, Eagle Ford, Haynesville, and Permian regions.
The EIA estimated US marketed natural gas production averaged 110 billion cubic feet per day in May, a 3 percent decrease from the first quarter of 2024.
“Production in the Haynesville and Appalachia regions is driven by natural gas prices, which reached record lows in early 2024,” said the EIA.
Permian gas flat
“Low natural gas prices encouraged producers in the Appalachia and Haynesville regions, in particular, to curtail production until market conditions changed,” it added.
The report said that unlike regions that focus more on natural gas production not associated with oil wells, natural gas production in the Permian region remained almost flat in May compared with the first quarter of 2024 as crude oil production in the Permian continued to grow.
The Outlook focused on US storage inventories as well to build its pricing forecasts.
“We are starting the summer with more natural gas than usual. Although we forecast an increase in natural gas prices for the summer months as storage inventories rise by less than the five-year average, we expect inventories will remain above the five-year average and keep prices below $3.00/MMBtu on average in the third quarter of 2024, similar to the $2.59/MMBtu average in third quarter of 2023,” said the report.
Natural gas storage inventories were 24 percent above the five-year average at the end of May, and the EIA forecasts storage inventories to end the summer injection season on October 31 at 6 percent above the five-year average.
“If US natural gas production is lower than our forecast and consumption in the electric power sector to meet air-conditioning demand increases more than we expect, natural gas prices could be higher than forecast,” the Outlook noted.
Looking at the crude oil market, US crude production is forecast to grow by 2 percent in 2024 and average 13.2 million barrels per day for the year and a further 4 percent in 2025.
“If our forecast is realized, US crude oil production would set new annual records in both 2024 and 2025,” stated the Outlook.
Texas oil surge
“Comparing the regions, we forecast the Permian region, mostly in Texas, will contribute almost two-thirds of all US crude oil production growth through December 2025,” the Outlook explained.
