IHS Markit: US natural gas prices should fall to 50-year lows

Large natural gas stocks in the United States are set to push fuel prices to a nearly 50-year low, IHS Markit said Thursday in a new report, with Henry Hub night gasoline prices averaging $ 1.92 per million UK thermal units by 2020.

Low prices are expected to come despite a robust expectation of export and domestic demand, as more oil and gas pipelines come online to alleviate this constraint. IHS Markit will increase oil production as a result of increased takeaway capacity, and natural gas will be produced as a by-product of this additional oil production, IHS Markit said.

According to a Reuters survey of analysts for the future of next year's US natural gas prices, IHS Markit's forecast was the lowest.

"It is simply too much too fast," said IHS Markets CEO Sam Andrus, adding that this forecast did not mean that the low prices would be here to stay. Admittedly, lower prices stifle new investments in exploration and drilling, but as demand eventually catches up, prices will rise again and again in balance.

The next pipeline that is expected to come online, with a view to natural gas production, is Kinder Morgan's $ 1[ads1].75 biillion Gulf Coast Express, coming online next month. All in all, pipeline capacity out of Perm is expected to increase by 6 billion cubic feet daily through 2022.

Hedge funds have long been calling the bottom for natural gas prices, and many have been betting that prices will fall. In August, hedge funds took their most robust position in natural gas futures in a decade. However, prices have risen significantly since then – 25% – according to the Wall Street Journal, and landed at $ 2.58 earlier this week, up from $ 2.07 during the first week of August.

By Julianne Geiger for Oilprice.com [19659002] More top readings from Oilprice.com: