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EIA sees higher natural gas prices on Ida In September Short-Term Energy Outlook, agency says Henry Hub spot price averaged $4 per million Btu, up 16% from August forecast Kristen Nelson Petroleum News
The U.S. Energy Information Administration said in its September Short-Term Energy Outlook, released Sept. 8, that it expects U.S. natural gas prices to remain higher for the coming months based on Gulf of Mexico production shut-ins related to Hurricane Ida, which had landfall in Louisiana Aug. 29.
The fourth-quarter Henry Hub spot price is forecast to average $4 per million British thermal units, up 16% from EIA’s August forecast.
“Hurricane Ida affected natural gas production at a time that the United States was already experiencing higher natural gas prices due to growth in exports, strong domestic natural gas consumption, and relatively flat natural gas production,” said EIA Acting Administrator Steve Nalley. “Lost production from the storm combined with these current market conditions has limited our ability to build up natural gas inventories, and we expect that will keep prices higher in the short term than we had previously thought.”
Producers shut-in some 90% of Gulf of Mexico natural gas and crude oil production due to Hurricane Ida. EIA said significant capacity - both in production and refining - remains offline, although the agency said it expects production and refining to gradually come back online through September.
Brent averages $71 EIA said Brent crude oil spot prices averaged $71 per barrel in August, down $4 per barrel from July, but up $26 per barrel from August 2020. “Brent prices have risen over the last year as a result of steady draws on global oil inventories, which averaged 1.8 million barrels per day” in the first half of the year, the agency said.
EIA expects Brent to remain near current levels for the remainder of the year, averaging $71 per barrel in the fourth quarter, but next year, “growth in production from OPEC+, tight U.S. oil, and other non-OPEC countries” is expected to “outpace slowing growth in global oil consumption and contribute” to a decline in Brent to an average of $66 per barrel.
With some 90% of crude oil production in the federal offshore Gulf of Mexico offline in in late August following Hurricane Ida, GOM production averaged 1.5 million barrels per day in August, down 300,000 bpd from July. EIA said it expects production to resume in September, averaging 1.2 million bpd in that month, and then returning to an average of 1.7 million bpd in the fourth quarter.
In June, the most recent month for which historic data is available, U.S. crude oil production averaged 11.3 million bpd, EIA said. The agency is forecasting production to remain near that level through the end of the year and then increase to an average of 11.7 million bpd in 2022, “driven by growth in onshore tight oil production,” with growth expected to “result from operators beginning to increase rig additions, offsetting production decline rates.”
OPEC crude oil production is forecast to average 26.4 million bpd this year, and to average 28.3 million bpd in 2022.
Natural gas EIA said the August increase in the Henry Hub spot price for natural gas to an average of $4.07 per million Btu, up from a July average of $3.84 per million Btu, “reflects hotter temperatures in August on average across the United States compared with July, which caused demand for natural gas in the electric power sector to be higher than expected. Prices rose further in late August when Hurricane Ida caused a decline in natural gas production in the GOM.”
The Henry Hub average this August, up $1.77 per million Btu from August 2020, reflected steadily rising gas prices this year, EIA said, due to factors including growth in liquefied natural gas exports, rising gas consumption in sectors other than electric power and relatively flat production.
As factors which drove prices higher in August lessen, EIA said, it expects Henry Hub to average $4 per million Btu in the fourth quarter.
Prices this winter are forecast to peak at $4.25 per million Btu in January and then decline, averaging $3.47 per million Btu in 2022 “amid rising U.S. natural gas production and slowing growth in LNG exports.”
Dry natural gas production is expected to average 92.7 billion cubic feet per day in the United States during the second quarter, EIA said, up from 91.7 bcf per day in the first quarter, and then rise to 95.4 bcf per day next year, “driven by natural gas and crude oil prices, which we expect to remain at levels that will support enough drilling to sustain production growth.”
EIA said U.S. dry natural gas production has been almost flat this year after a brief decline in February caused by severely cold weather in Texas and the agency expects production to remain relatively flat for the remainder of the year.
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