Average natural gas prices projected to drop 9% in 2020 

    In its 2020 Short Term Energy Outlook, the U.S. Energy Information Agency projects average U.S. natural gas prices will be 9% lower in 2020, but will likely return to current levels the following year.

    To blame, the agency says, are improved drilling efficiency and cost reductions, higher associated gas production from oil-directed rigs and increased takeaway pipeline capacity from the Appalachian and Permian regions. Production growth will likely outpace a rise in domestic demand and exports, EIA projects, leaving a negative impact on pricing.

    The agency says it expects the natural gas spot price for the U.S. benchmark Henry Hub will average $2.33 per million British thermal units in 2020—roughly 24 cents lower than the 2019 average. 

    In 2021, however, EIA expects upward pricing pressure from declining growth in production to drive natural gas prices back up by 9%. According to the agency, natural gas consumption in the U.S. industrial sector is projected to continue to grow in 2020, rising 4.6%, driven by new methanol plants using natural gas as feedstock that are scheduled to come online this year. However, EIA expects industrial sector consumption to flatten the following year because of higher industrial sector natural gas prices.

    Also, EIA is projecting the new MARPOL Convention regulation lowering the maximum sulfur content of marine fuel oil used in oceangoing vessels from 3.5% of weight to 0.5% will encourage global refiners to increase refinery runs and maximize upgrading of high-sulfur heavy fuel oil into low-sulfur distillate fuel to create compliant bunker fuels. Read the full report.

    This story originally ran in 10/12 Industry Report. Subscribe to the free 10/12 Weekly e-newsletter to keep up with industry news across the region.

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