In its January Short-Term Energy Outlook (STEO), EIA estimates that annual U.S. marketed gas production for 2021 will fall 2% and average 96.2 billion cubic feet per day (Bcf/d). However, in 2022, EIA estimates that natural gas production will rise by 2% compared with year-ending 2021 production of 98.2 Bcf/d, accompanied by rising natural gas prices. The United States set annual natural gas production records in 2018 and 2019, largely based on increased drilling in shale and tight oil formations. This increased production led to higher volumes of natural gas in storage and a corresponding decrease in natural gas prices. In 2020, the supply and demand contraction as a result of the COVID-19 pandemic resulted in marketed natural gas production decreasing by 2% from 2019 levels.
The January STEO also forecasts associated gas production from oil wells in the Permian Basin to fall because of a lower West Texas Intermediate (WTI) crude oil price and reduced drilling activity in the early months of 2021. As the WTI price increases, associated gas production will likely rise with it. Natural gas production from predominantly natural gas regions such as the Appalachia Basin is closely tied to the Henry Hub price. EIA estimates that the Henry Hub price will gradually rise from an average $2.03 per million British thermal units (MMBtu) in 2020 to more than $3.00/MMBtu in 2022. The increase in the Henry Hub price is likely to result in a rise in natural gas production in Appalachia. However, natural gas production in Appalachia may reach its takeaway capacity constraints in 2021 if the Mountain Valley Pipeline (MVP), scheduled to enter service in late 2021, is delayed. MVP is the only active pipeline project planned to come online in 2021 that will add significant takeaway capacity from the Appalachia region.
A recent Today in Energy article provides more information about recent natural gas and crude oil production trends.
