U.S. natural gas production will drop more this year than earlier estimates and demand will hit a record, the U.S. Energy Information Administration said in its Short Term Energy Outlook on Tuesday.
EIA projected dry gas production will ease from a record 103.8 billion cubic feet per day (bcfd) in 2023 to 102.1 bcfd in 2024 as several producers reduce drilling activities after gas prices fell to more than three-year lows in February, March and April.
In the May edition of its STEO report, EIA had forecast this year’s output to decline to around 103 bcfd.
For next year, the agency now projects output would rise to 104.4 bcfd, also a cut from its prior forecast of 104.8 bcfd.
“This report is bullish for natural gas,” Rabobank strategist Joe DeLaura said, noting that lower output forecasts should ease oversupply concerns in the long-term.
Declining output will put upward pressure on gas prices this year, EIA said. The agency raised its forecast for 2024 average Henry Hub spot gas prices to $2.46 per million British thermal units (Btu), 13% higher than its previous forecast. Prices are expected to average $3.24 next year.
Higher prices will support the return to growth in output next year, EIA said.
“(It) will incentivize more drilling in the natural gas-producing Appalachia and Haynesville regions, and more associated natural gas production in the Permian region,” the agency added.
EIA expects domestic gas consumption to rise from last year’s record of 89.1 bcfd to 89.4 bcfd this year and 89.9 bcfd in 2025. Its earlier forecasts had put demand at around 89.3 bcfd this year and 89.6 bcfd next year.
(Reporting by Shariq Khan in New York; Editing by David Gregorio and Will Dunham)