BAKU, Azerbaijan, Nov.7
By Leman Zeynalova – Trend:
Henri Hub gas prices will face renewed downside pressure in 2020, Trend reports with reference to Fitch Solutions Macro Research (a unit of Fitch Group).
“The slowing global economy and an expected increase in global liquefaction capacity will impact demand for US LNG. However, US exports are well suited to downturn in LNG prices as feed gas prices will remain low ensuring exports remain profitable. Though we expect demand will rise in response to lower prices, at the continued expense of coal fired power generation, HH will face renewed downside pressure in 2020. Currently natural gas makes up 58 percent of thermal power generation and is expected to grow to 71 percent by 2028 . This shift in consumption will ultimately prove insufficient as US power generation from gas slows overall as natural gas share of electricity generation remains broadly flat,” reads a report released by Fitch Solutions.
The company expects that production of US natural gas will grow by 10.3 percent y-o-y in 2019 and 3 percent in 2020 after an estimated 11.5 percent gain in 2018.
“Producers will accelerate well completions and boost output as new pipeline capacity becomes available, but gains will be limited as profitable growth remain a priority for US independents. Liquefied natural gas (LNG) exports will moderate in 2021 following the 2019 start-up of an additional 22.4 billion cubic meters (17.05mtpa) of liquefaction capacity, with shipments expected to reach over 40 billion cubic meters from 30.6 billion cubic meters in 2018,” said the company.
The report says that pipeline exports will remain buoyant with growth expected throughout the forecast period as new midstream projects in Mexico come online supporting increased pipeline exports.
“Working gas storage is expected to exceed five-year maximum levels as output rates remain flat. Current demand also remains broadly flat as mild seasonal temperatures have gas storage growing at a faster rate to close the injection season.”
Compared to the previous year's storage, storage levels in 2019 have grown faster, particularly since April, which has helped to keep Henri Hub prices depressed, according to Fitch Solutions.
“Should this trend continue, it will push storage level above 2017's peak levels. Substantial build up in storage will further depress prices in 2020 until excess storage is consumed and seasonal levels closer return to historical averages. More is needed from producers to limit supply growth, with HH prices set to average well below the $3.0 /mnBTU mark through 2022. The relatively rapid production response to price changes employed by shale operators may limit upside and keep prices range bound in the medium term.”
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