EIA: Natural Gas Production Will Fall 7 Bcf/d in 12 Months

April 10, 2020April 20th, 2020
Print Friendly, PDF & Email

The EIA significantly reduced their gas production forecasts in their April Short Term Energy Outlook (STEO). These forecasts reflect the first full month of changes after March’s oil-price collapse and COVID-19 market impacts.

The EIA’s current gas-production forecasts are close to AEGIS’ internal models. AEGIS maintains a bullish point of view on natural gas prices, especially heading into 2021.

Looking at the Natural Gas STEO Production chart below, we can see the evolution of the EIA’s forecasted outlook. The March forecast, released last month, was delayed, by a day, in order to incorporate the effects of the oil-price collapse and the widespread COVID-19 outbreak. April is the first month to include the full effects of the current market situation.

Compared to the March forecast, the EIA believes production will be, on average, 4.7 Bcf/d lower going through 2021. AEGIS’ internal production forecasts concur with this outlook, albeit with production staying lower for longer. However, we see hedges and Permian-basin flaring partially mitigating production declines.

7 Bcf/d drop

On the demand side, the EIA noticeably lowered their estimates compared to changes in previous months. The average decline in demand across the forecasted strip is approximately 4.0 Bcf/d versus their month-ago forecast.

AEGIS believes the 2021 natural-gas market will be relatively undersupplied compared to 2019 and 2020. This undersupply will come from lower associated-gas growth due to (1) oil well shut-ins and (2) less development in both oil and rich-gas wells. Even though we expect demand growth in 2021 to be minimal, the potential size of supply losses should carry price higher.

We continue to monitor oil, gas, NGLs, and regional markets for hedging opportunities. To learn more and see AEGIS opinion and recommendations, go to AEGIS View publications, or contact info@aegis-energy.com. Like what you see? Share this article with the button on the bottom right of your desktop. Market questions or comments? Contact us at view@aegis-energy.com

Back to AEGIS Market Summary beta blog

NOTICE: The content of this report is provided for information purposes only and has been prepared to describe current trends in the commodities markets. This information does not constitute either investment or hedging advice and is intended only for AEGIS clients. If you are not the intended recipient of this report, then you may not disclose, print, copy or disseminate this information. Otherwise, if you have received this transmission in error, then please notify the sender and delete the report.

Access Our Deeper Market Insights

Product Factor Matrix

Proprietary view of priced-in factors driving the market vs. potential bullish and bearish surprises.

Learn More

Trading Recommendations

Clear trading recommendations based on real market opportunities that enable clients to take action.

Learn More

Market Data

A comprehensive suite of the latest curves, spot pricing, settles, and strips to drive confident hedging decisions.

Learn More

Benchmarking and Trade Analytics

Real-time access to analyze your hedging strategy against AEGIS benchmarks and current market activity.

Learn More