2018 Natural gas supply and demand forecast

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EnerNOC's Intelligence & Analytics Team, Information Technology and Services , EnerNOC
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New pipeline and other infrastructure projects that are planned or in development will create easier access to domestically produced natural gas throughout the US, which will enable increases in supply over the long term. The extended cold snap seen in late 2017 and early 2018 showed that natural gas prices remain responsive to fluctuations in weather. When considering the natural gas for 2018, we must look at not only the demand forecast but also the supply. 

Natural Gas Demand Forecast

1. Short-Term Weather Impacts: The continued connection between weather and short-term prices make the current forward prices for 2019-2020 more attractive for customers looking to secure low-cost long-term contracts. As the calendar turned from 2017 to 2018, extremely low temperatures across the US-led natural gas consumption to reach 115.7B cubic feet, a 31% increase and a new high for the time of year since 2007, according to PointLogic Energy. The beginning of 2018 has demonstrated the need for an energy sourcing risk management strategy as the natural gas market clearly remains responsive the short-term impact of weather.

2. Pipeline Exports: The growing market for pipeline exports of natural gas to Mexico has created another source of demand for natural gas producers in the US. Increased cross-border competition has the potential to drive up prices in southern US markets, although increased gas availability driven by rising Texas oil production in late 2017 may limit any spikes in prices.

3. LNG Exports: A steady increase in liquefaction and export capacity will drive demand for natural gas in 2018. Increasing Australian exports should foster competition in the Asian markets, but we expect the demand for US LNG to remain strong in Latin America and Europe—leading to upward pressure on US prices. US liquefied natural gas (LNG) exports more than quadrupled in 2017, which the S&P Global Commodity report attributes largely to the opening of Sabine Pass Trains 3 and 4 in Louisiana. The natural gas markets are also expecting new trains to come online at LNG facilities in Georgia and Texas, representing an additional 0.9 Bcf/d in 2018 and 3 Bcf/d in 2019.

Natural Gas Supply Forecast

4. Natural Gas Production: After declining in 2016 for the first time in 11 years, natural gas production rose 1.3% in 2017 in response to increases in takeaway pipeline capacity. We expect 2018 to show continued production increases, as Platts is forecasting 8.5% average production growth throughout the year.

5: Pipeline Development: A number of significant new Northeast pipelines and system improvements are currently under construction, and are expected to add more than 4.5 Bcf/d of pipeline capacity by the end of the 2018 winter season. These projects include the 0.5 Bcf/d Access South and Adair Southwest project bringing gas south toward the gulf, the 1.5 Bcf/d Leach Xpress carrying gas into western Ohio, and the 2.55 Bcf/d Rover Phase II sending gas north and west into Michigan. This additional infrastructure will help lower gas and power prices for customers throughout PJM and the surrounding regions.

Customers will continue to feel the downstream effects of an evolving power generation mix in 2018. Short-term price volatility will continue—and may yet increase—as natural gas assumes a larger role in the power generation mix. Attractive forward prices and new technologies, however, provide energy buyers natural hedging options.

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