2Q 2020 –
- Impacts from COVID-19 have hit US LNG demand hard dropping feedgas deliveries to 3 Bcf/d in July, driven by numerous cargo cancellations from international buyers. A rebound in US LNG could be limited by Europe’s ability to absorb US exports as European gas storage is on pace to once again hit max capacity before the end of the summer. BTU Analytics expects US LNG exports to average 5.6 Bcf/d in 2021 and 2022, comparable to 2019 export levels. Despite limited growth in LNG, current production activity levels are unable to sustain needed gas supply necessitating stronger Henry Hub pricing in 2021 to incentivize the return of gas-dedicated drilling.
- Oil production curtailments in the near-term and sustained production declines in the long-term are expected to remove significant associated gas volumes from the market, particularly in West Texas. The loss of associated gas volumes in the market is expected to put significant upward pressure on basis markets across the west as volumes from West Texas moving into the Rockies and Midcontinent are likely to decline. In gas-focused plays such as the Haynesville and Marcellus & Utica, outright pricing is expected to improve in late 2020 and 2021 to support the return of activity to the regions as associated gas production declines, opening space in the market for incremental gas-focused production.