Natural gas production is set for a significant increase over the next year thanks to the current imbalance between demand and supply, which has pushed prices to record highs, Reuters’ John Kemp reports, citing energy traders.
Meanwhile, however, gas supply for this winter season will be tight, Kemp also said, adding that as a result and in anticipation of next year’s supply recovery, Henry Hub futures had swung into a backwardation, with contracts for delivery in January 2023 round $1.15 per mmBtu lower than contracts for delivery next January. Current Henry Hub prices are around $5 per mmBtu, which is double the price from a year ago, according to the Wall Street Journal.
Natural Gas Prices At Record Highs
The Journal’s Jinjoo Lee noted in a recent report that natural gas could “really use an OPEC-style, coordinated production ramp-up right now.” While U.S. natural gas prices were double those a year ago, the increase in Asia and Europe was even larger, at four times for Asia and five times for Europe, which is already suffering the consequences of gas shortages, with electricity prices spiking, prompting protests in parts of the EU.
It is this tightness of supply that will be one of the biggest motivators for higher U.S. gas production next year, although, per Kemp, the ramp-up in production has already started, with the active rig count topping 100 as of early September and average daily output at 79 billion cu m.
Over the last year, gas producers have boosted production by 1.4 billion cu ft, Canary LLC CEO Dan Eberhart reported for Forbes, and the EIA expects the average daily production for the second half of the year will be 92.9 billion cu ft, up from 91.4 billion cu ft during the first half.
Exports are also set to rise next year, from 14 billion cu ft this year to 19 billion cu ft in 2022, including pipeline and LNG exports.
By Irina Slav for Oilprice.com
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