BAKU, Azerbaijan, July 20. The International Energy Agency (IEA) anticipates an inflection point in US gas production dynamics in the second half of 2024, Trend reports.
According to the agency's latest outlook, US dry natural gas production in the first half of 2024 experienced significant price fluctuations, transitioning from continuous growth to more stable output levels. This trend is expected to persist throughout the year as upstream players adapt to the current pricing environment and prepare for the next cycle of LNG export growth in the latter half of the decade.
In early 2024, dry gas production saw a notable decline from the peak monthly levels reached in late 2023. This decrease was driven by weaker market fundamentals, including modest weather-related domestic demand and month-on-month declines in LNG exports due to key plant outages, which led to a sharp drop in prices. The Henry Hub spot prices fell from nearly USD 3.20/MBtu in January 2024 to under USD 1.50/MBtu in March 2024, prompting some producers to announce capital expenditure (CAPEX) cuts and reducing upstream activity.
Despite a 2.5% decrease from Q4 2023 levels, Q1 2024 dry gas production was still approximately 2.9% higher year-on-year, thanks to much stronger February production following shorter-lived weather-induced outages than in recent years. Robust oil production also supported associated gas production, particularly in the Permian Basin, where gas production growth was close to 15% year-on-year in Q1, compensating for losses in other shale plays.
In May 2024, Henry Hub spot prices surged by around 30% in one month. However, overall Q2 2024 gas production fell both quarter-on-quarter and year-on-year as upstream activity took time to respond to the remaining bearish market factors. High storage fill levels, the end of the heating season, and a 16% year-on-year drop in May’s US LNG exports due to plant outages kept demand-side pressures low through the spring months. These factors contributed to restrained production gains in the first half of the year. Total production growth in H1 2024 was just 1% year-on-year, significantly lower than the ~5-6% growth rates seen in the same period over the previous two years.
Looking ahead to the second half of 2024, while production trended downward from early Q1 to late Q2, a slight recovery is expected in H2 2024, though output will remain lower year-on-year. Continued associated gas production growth in the Permian Basin and a more favorable domestic gas price environment should support non-associated production. Modest domestic demand growth and the start-up of LNG projects in H2 2024 are also expected to contribute to a more dynamic market environment. However, gas production in the second half of the year is projected to remain about 1% lower than record H2 2023 levels, leaving the full-year 2024 gas production outlook broadly flat compared to 2023.