U.S. natural gas market trends in 2018 are expected to continue in 2019 and 2020 as Henry Hub natural gas prices are expected to remain stable and natural gas consumption, exports and production should rise, according to the U.S. Energy Information Administration. Consumption is expected to increase in the electric and industrial sectors, offsetting decreases in the residential and commercial sectors.
U.S. benchmark Henry Hub natural gas spot price is expected to fall about 25 cents to an average of $2.89 per million British thermal units in 2019, from 2018. It will rise 3 cents to an average of $2.92 per million British thermal units in 2020, from 2019. New York Mercantile Exchange trading for the week ending Jan. 10, show the range of $1.85 per million British thermal units to $4.80 per million British thermal units reflect the market expectation for Henry Hub prices in December 2019 at a 95% confidence level.
Record-high dry natural gas production in the United States is expected to continue through 2020, with production increasing 8.3% to 90.2 billion cubic feet per day in 2019, from 2018, and 2.2% to 92.2 billion cubic feet per day in 2020, from 2019. The majority of production will be from the Appalachian Basin in the Northeast, followed by the Permian Basin in western Texas and eastern New Mexico and the Haynesville shale formation in eastern Texas. Improved drilling efficiency, cost reductions in drilling and well completions and a rise in takeaway capacity will allow for continued production growth.
U.S. consumption will rise 1.3% in 2019 and 1.1% in 2020 to a total of 83.6 billion cubic feet per day. Milder weather is expected to lead consumption to decline in the residential and commercial sectors, and the decline will be offset by increased consumption in the electric power and industrial sectors, which have added equipment or changed processes to consume more natural gas.
Natural gas-fired plants continue to displace coal-fired plants, and in 2019, 7.5 gigawatts of natural gas capacity will be added, while 4.5 gigawatts of coal-fired capacity will be retired. Natural gas will remain the primary source of U.S. electricity generation, increasing from 35% in 2018 to 37% in 2020. Coal-fired electricity generation will fall from 28% to 24%.
Natural gas consumption in the industrial sector will rise 2% in 2019 and 1% in 2020. The rise will be supported by new methanol plants, which use natural gas feedstock, and they will begin operations in 2019 and 2020.
Exports of natural gas will continue to rise as production exceeds consumption. The majority of the rise in exports is expected to be attributed to the addition of liquefied natural gas (LNG) capacity at the Cameron LNG and Freeport LNG facilities along the Gulf Coast and the Elba Island LNG facility in Georgia. Exports are expected to more than double to 6.8 billion cubic feet per day in 2020, from 2018.
Exports of natural gas by pipeline are projected to rise 19% to 8.4 billion cubic feet per day in 2020, from 2018. The rise will be a result of increasing natural gas demand and pipeline projects in Mexico, and the pipelines should be completed in 2020. U.S. imports of LNG are expected to be flat through 2020, and decreases in imports by pipeline will continue as Appalachian production and takeaway capacity displace Canadian natural gas in the U.S. Midwest markets.