US natural gas price to reach its lowest level since 1970s


Owing to an oversupply of natural gas, the price for the energy resource in the US is expected to reach its lowest ever since the 1970s, according to IHS Markit.

The research firm says will reach below $2/MMBtu for the year during the 2020s.

The last time the price fell below $2 was in 1995. Read more stories about natural gas here

The oversupply of the natural gas will be reinforced by a new surge in associated gas production from the Permian Basin.

Even the increase in demand will not be able to increase the price of natural gas. The domestic demand has increased by 14 billion cubic feet per day (BCF/d) since 2017 and is expected to increase by an additional 3 BCF/d of liquefied natural gas (LNG) in 2020.

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Natural gas production in the US has also grown by more than 14 BCF/d since January 2018 to more than 90 billion cubic feet per day in 2019 and 2020.

Sam Andrus, executive director at HIS Markit, said: “It is simply too much too fast.

“Drillers are now able to increase supply faster than domestic or global markets can consume it. Before market forces can correct the imbalance, here comes a fresh surge of supply from somewhere else.

 “Nearly all the growth in U.S. natural gas demand over the next few years will come from LNG exported to other countries. The added supply from the Permian will match—if not exceed—those volumes.”

 Michael Stoppard, the chief strategist for the global gas, IHS Markit, added: “In all events, the gas is going to get produced out of the oil well. The real change here is the transportation capacity.

 “You go from a situation where producers, in many cases, we’re paying someone to take their gas to have an economic means of getting it to market.”