The recovery in shale oil and associated gas production are expected to put pressure on the US gas industry, analysts said. Gas prices tumbled to around $2/MMBtu at the start of the year, prompting producers to scale back growth plans before the crude price collapse forced wider shut-ins in the oil industry.
Declining US associated gas output has improved gas producers’ confidence in recent months that US oversupply will ease by 2021. Nymex futures prices for January 2021 have increased to nearly $3/MMBtu, even as prompt-month prices stay below $2/MMBtu.
However, analysts expect that gas prices would be under pressure again if the recent recovery in US oil prices sustains and triggers shale oil and associated gas outputs to recover. At the same time, export demand for US LNG remains weak. Gas output from the Permian Basin is estimated to have risen by 1 Bcfd from May to June. Meanwhile, demand for US LNG fell by 2 Bcfd over the same period.
