North America gas long-term highlights H1 2017: Permian, Montney and Northeast keep gas prices lower for longer
With less than 1 bcfd of supply growth in the US so far this year, strong export demand should hold Henry Hub prices well above $3/mmbtu even with weak weather-based domestic demand. However, the recovery in oil and gas drilling over the past year and pipeline expansion in the Northeast signals an increase in supply starting this summer and continuing through 2018. We expect Henry Hub prices this year to average $3.43/mmbtu and $3.27/mmbtu (nominal) in 2018. Midterm prices fall, averaging below $3/mmbtu between 2019 and 2024, as demand growth is matched with cheap supplies from the Northeast and Permian. In the longer term the Northeast pipeline capacity currently under development will fill up, and associated gas production begins to plateau. This opens the door for production recovery in the Haynesville, and continued WCSB growth. Realized prices will rise, we expect Henry Hub prices in the mid-$3/mmbtu range in the second half of the next decade.