Page 10 - NorthAmOil Week 48 2020

NorthAmOil COMMENTARY NorthAmOil

LNG exports are helping
to support US gas
prices.

continuing to decline, with the Appalachia rise for crude prices, projecting that West Texas
and Haynesville regions the only exceptions. Intermediate (WTI) will average $44.24 per bar-
The increases it projects are slight, though. In rel in 2021, up from a forecast $38.24 per barrel
Appalachia, a rise of 27,000 cubic feet (765 cubic in 2020, but still below the $56.99 per barrel aver-
metres) per day compared with November is age it reached in 2019.
forecast for December, and in the Haynesville, This comes as OPEC met this week and
the EIA anticipates that production will climb opted not to delay a planned increase in pro-
by 2,000 cubic feet (57 cubic metres). Appala- duction despite the global recovery remaining
chia – which contains the Marcellus and Utica fragile. This time, the cartel is not thought to
shale plays – and the Haynesville are the only consider US shale to be a threat, marking a
regions where the EIA expects oil production to change from recent years.
go up or stay flat rather than falling. However, “In the future, certainly we believe OPEC will
given that these are overwhelmingly gas-pro- be the swing producer – really, totally in con-
ducing regions, these do not present a mean- trol of oil prices,” EOG’s CEO, Bill Thomas, said
ingful illustration of oil output trends. last month. “We don’t want to put OPEC in a
Separately, the EIA’s data show that Henry situation where they feel threatened, like we’re
Hub gas prices have recovered slightly towards taking market share while they’re propping up
the end of 2020, having fallen to an average of oil prices.” The EIA’s data
$1.63 per million British thermal units ($45.09 Other major shale producers have ech-
per 1,000 cubic metres) in June. The Henry Hub oed this cautious approach and it appears show that Henry
price averaged $2.61 per mmBtu ($72.19 per that even if prices rise, they will not rush to Hub gas prices
1,000 cubic metres) in November, and the EIA boost output, especially as they remain under
projects in its Short-Term Energy Outlook that pressure to demonstrate fiscal restraint to have recovered
this will rise to $3.42 per mmBtu ($94.60 per shareholders.
1,000 cubic metres) in January 2021. “I see no more growth until 2022, 2023, and it slightly towards
This will coincide with demand going up as will be very, very light in regard to the US shale
a result of the winter heating season, but the industry ever growing again,” Pioneer Natural the end of 2020.
agency also expects that Henry Hub prices will Resources’ CEO, Scott Sheffield, told Bloomberg
remain above $3.00 per mmBtu ($82.98 per recently.
1,000 cubic metres) over the whole of 2021. It But with the outlook for gas prices and
forecasts that they will average $3.14 per mmBtu exports improving, it is not surprising that
($86.85 per 1,000 cubic metres) for the year, tight oil producers are sharpening their focus
compared with a projected average of $2.14 per on those gas opportunities that are availa-
mmBtu ($59.19 per 1,000 cubic metres) in 2020. ble to them. Not all will have high-quality gas
Rising LNG exports are also anticipated to help acreage, but in the short term it appears likely
prop up gas prices. that those that do will pay more attention to it.
Fourth-quarter results announcements are still
What next? around two months away, but can be expected to
Meanwhile, the EIA is predicting only a modest provide further evidence of this trend.™

P10 www. NEWSBASE .com Week 48 03•December•2020