LNG exports to average 2.7 Bcf/d higher YoY
Associated gas production slow to recover
Denver — Despite entering the heating season with US natural gas in storage towering near an all-time high, strengthening LNG export demand coupled with associated gas production declines in oil-rich fields should leave volumes below average levels exiting the season.
Not registered?
Receive daily email alerts, subscriber notes & personalize your experience.
Register NowUS working gas in storage fields peaked at 3.958 Tcf on Nov. 13. It has only peaked higher in 2016 and 2015 at 4.047 Tcf and 4.009 Tcf, respectively, according to US Energy Information Administration data. It is forecast to exit the current heating season at 1.532 Tcf at the end of March, according to S&P Global Platts Analytics. That would be 162 Bcf below the five-year average as lower domestic supply combined with higher exports year over year look to slash into stockpiles during the withdrawal season, even with a normal temperature outlook.
Platts Analytics is forecasting associated gas declines through the first half of 2021 given the monumental rig loss experienced in early 2020. In early 2020, associated gas production topped 33 Bcf/d. It fell below 28 Bcf/d by May due to producer shut-ins following the collapse of crude oil prices and the onset of the coronavirus pandemic. It is expected to remain just below 28 Bcf/d throughout 2021.
While rigs plying the associated gas plays have begun to recover, further rig additions will be needed to offset losses experienced in 2020. Rig activity will continue to recover with improved WTI prices. However, cash-strapped operators will prioritize their balance sheets and lingering debt maturities as opposed to rapid expansion or development.
Associated gas production losses, specifically in the big five shale oil plays, including the Permian, Eagle Ford, SCOOP/STACK, Bakken and Denver-Julesburg basins, saw production drop by 3 Bcf/d by November from pre-pandemic levels. These supply losses were met by a historic underutilization of US LNG export capacity, which dipped as low as a 40% utilization in select summer months.
However, the US market is now poised for a massive 2.5 Tcf draw under normal weather this winter, which should have supported prices above $3/MMBtu, according to Platts Analytics. A mild start to winter wrecked some of the bullish sentiment prevalent in the market, pushing both the winter 2020-2021 strip and summer 2021 strip well below $3/MMBtu. By the end of December, the remaining winter strip averaged $2.52 while the summer strip was at $2.60.
Despite the mild start to winter, Platts Analytics believes Henry Hub prices are still poised to average above $3/MMBtu in 2021, the highest annual average since 2014, due to the continued loss of associated gas production and higher levels of ethane recovery. Production will take a hit from both lower associated gas volumes and less ethane rejection.
Prices need to trade higher to incentivize the return of dry gas production growth, namely from the Haynesville Shale, which has already seen a large run-up in rigs to finish 2020 from a low of 32 rigs in June to 46 rigs as of the end of December, according to Enverus. US Northeast production, however, will be more challenged to grow in light of lingering pipeline constraints, which should keep regional basis differentials wide.
Platts Analytics anticipates summer 2021 utilization of LNG export capacity will average roughly 70%, which contrasts with just 55% during summer 2020. LNG exports throughout the entirety of 2021 are projected to average 9.9 Bcf/d compared to 7.2 Bcf/d in 2020 and 5.6 Bcf/d in 2019.
Although meaningful, power demand destruction due to more renewable generation in 2021 will be met by increases in LNG demand and therefore will not be enough to offset overall lower supply this winter. This leaves storage fields to make up the difference.
Although inventories this winter will be able to handle such a strong pull, the lower associated gas production expected for most of 2021 will limit the ability of several key regions, specifically the South Central, to build storage inventories next summer. Working gas storage is expected to peak at 3.2 Tcf entering winter 2021-22, more than 700 Bcf below the start of winter 2020-21.
"Exit" - Google News
January 01, 2021 at 03:30AM
https://ift.tt/34ZPFfR
COMMODITIES 2021: US storage fields forecast to exit winter, begin next heating season, below average - S&P Global
"Exit" - Google News
https://ift.tt/2zNkU0N
https://ift.tt/2YrnuUx
Bagikan Berita Ini
0 Response to "COMMODITIES 2021: US storage fields forecast to exit winter, begin next heating season, below average - S&P Global"
Post a Comment