EIA sees below-average nat gas stocks next winter
Houston, 10 January (Argus) — US natural gas inventories should enter next winter at below-average levels as growing exports and domestic consumption more than offset an increase in production.
Domestic stockpiles, which can ease US market concerns about spikes in demand or supply shortfalls, should exit the heating season on 31 March at 1.745 Tcf (49bn m³), 3.3pc below the five-year average, according to the US Energy Information Administration's (EIA) Short-Term Energy Outlook. In addition, US inventories will finish the upcoming injection season and enter next winter on 31 October at 3.667 Tcf, or 5pc below the five-year average.
Gas stockpiles — which reached an all-time high in mid-November 2016 — have dropped rapidly in recent weeks as persistently low prices last year cut into domestic production and encouraged more widespread use of the heating and power plant fuel. That shift in the US gas market has propelled prompt-month prices from a 17-year low last March below $1.65/mmBtu to a two-year high on 28 December of $3.93/mmBtu.
The EIA projects that residential, commercial and industrial consumption will increase in 2017. Residential and commercial consumption should rise this year by 5.9pc and by 5.2pc, respectively, as winter temperatures return to more normal levels from the prior year's unusually mild conditions.
Industrial consumption should rise in 2017 to 21.16 Bcf/d, up by 0.6pc, as new chemical and fertilizer plants come on line. But power sector gas consumption should drop this year, to 26.24 Bcf/d, a year-over-year decline of 4.4pc, as higher gas prices contribute to greater use of coal-fired generation, the EIA said.
US exports of LNG, which ramped up last year to 0.5 Bcf/d, should average 1.4 Bcf/d in 2017. Meanwhile, pipeline exports are projected to increase modestly on continued growth of power sector demand in Mexico. The EIA sees pipeline exports this year averaging about 6 Bcf/d, up by 0.1 Bcf/d from the average in 2016.
Dry-gas production should return to growth this year thanks to rebounding prices. The EIA estimates production dropped last year to about 72.4 Bcf/d, down by 2.4pc from 2015 and the first year-over-year decline in more than a decade. But output of dry gas should rise by about 1.4 Bcf/d on higher gas prices and the completion of new infrastructure in the Marcellus and Utica shales in the northeast US.