‹ Analysis & Projections

Short-Term Energy Outlook

Release Date: September 9, 2014  |  Next Release Date: October 7, 2014  |  Full Report    |   Text Only   |   All Tables   |   All Figures

Natural Gas

Industrial natural gas consumption has grown steadily since 2009, as relatively low prices have been attractive to consumers who use natural gas as a feedstock for chemical production. Ammonia-based fertilizer and methanol plants that use natural gas as a feedstock are among the most natural gas-intensive industrial end users. Low gas prices and proximity to shale resources have led to proposals for several methanol and ammonia plants. Two methanol plants are currently under construction and set to begin service this year- a small facility in Pampa, Texas and one in Geismar, Louisiana. Two large facilities coming online in 2015, a methanol plant in Clear Lake, Texas, and a fertilizer/urea plant in Wever, Iowa, will support continued growth in industrial demand. Many large plants use more than 0.1 billion cubic feet per day (Bcf/d) of natural gas. EIA projects growth in industrial demand will continue through 2015, with consumption averaging 21.3 Bcf/d in 2014 and 22.1 Bcf/d in 2015.

Natural Gas Consumption

EIA expects total natural gas consumption will average 72.6 Bcf/d in 2014, an increase of 1.8% from 2013 led by the industrial sector. In 2015, total natural gas consumption increases 0.2% as continued industrial sector growth offsets lower residential and commercial consumption. Higher natural gas prices this year contribute to a 2.0% decline in natural gas consumption in the power sector to 21.9 Bcf/d in 2014. EIA expects natural gas consumption in the power sector to increase to 22.8 Bcf/d in 2015.

Natural Gas Production and Trade

EIA expects natural gas marketed production to grow by an annual rate of 5.3% in 2014 and 2.1% in 2015. STEO projects that strong increases already seen in the Lower 48 states this year will continue, offsetting declines in the Gulf of Mexico. As of June, the most recent month for which EIA data are available, marketed production was 4.6 Bcf/d greater than it was in June 2013. Rapid natural gas production growth in the Marcellus formation has contributed to low natural gas forward prices in the Northeast, and as a result new infrastructure has been proposed to flow gas to other market regions. In June, the eastward-flowing Rockies Express Pipeline (REX) began service on its Seneca Lateral, which flows Marcellus gas westward to the Midwest. REX's parent company, Tallgrass Energy, plans to add bi-directional capability on a significant portion of REX's easternmost segment.

Growing domestic production is expected to continue to put downward pressure on natural gas imports from Canada, and spur exports to Mexico. Exports to Mexico have been increasing in recent months because of growing demand from Mexico's electric power sector and flat Mexican production. Mexico has been an outlet for U.S. production, particularly from the Eagle Ford Shale in South Texas.

Liquefied natural gas (LNG) imports have fallen over the past four years because higher prices in Europe and Asia are more attractive to sellers than the relatively low prices in the United States. This month's STEO revises the forecast for 2015 LNG net imports to reflect Cheniere Energy's Sabine Pass export terminal beginning service in 2015. EIA now expects the United States will be a net exporter of LNG in 2015. LNG exports are still a very small part of the total picture, however, and overall the United States will remain a net importer of natural gas because of pipeline imports from Canada.

Natural Gas Inventories

Natural gas working inventories totaled 2,709 Bcf as of August 29, which was 471 Bcf lower than the same time last year and 495 Bcf lower than the previous five-year (2009-13) average. The injection season began somewhat slowly in April, but has continued at a strong pace, with injections averaging above the five-year average throughout most of the injection season. EIA expects working gas stocks will reach 3,477 Bcf at the end of October, 339 Bcf lower than at the same time last year.

Natural Gas Prices

Natural gas prices fell from $4.05/MMBtu in July to $3.91/MMBtu in August as storage injections continue to outpace historical norms. EIA expects spot prices will remain below $4/MMBtu through October, before rising with winter heating demand. Projected Henry Hub natural gas prices average $4.46/MMBtu in 2014 and $3.87/MMBtu in 2015.

Natural gas futures prices for December 2014 delivery (for the five-day period ending September 4) averaged $4.07/MMBtu. Current options and futures prices imply that market participants place the lower and upper bounds for the 95% confidence interval for December 2014 contracts at $3.09/MMBtu and $5.35/MMBtu, respectively. At this time last year, the natural gas futures contract for December 2013 averaged $3.87/MMBtu and the corresponding lower and upper limits of the 95% confidence interval were $2.98/MMBtu and $5.04/MMBtu.

U.S. Natural Gas Summary
  2012 2013 2014 2015
Prices (dollars per thousand cubic feet)
Henry Hub Spot 2.83 3.84 4.59 3.99
Residential Sector 10.69 10.31 11.09 11.18
Commercial Sector 8.09 8.12 9.00 9.05
Industrial Sector 3.88 4.66 5.46 4.96
Supply (billion cubic feet per day)
Marketed Production 69.15 70.18 73.93 75.47
Dry Gas Production 65.73 66.53 69.76 71.15
Pipeline Imports 8.10 7.63 7.47 7.36
LNG Imports 0.48 0.27 0.18 -0.08
Consumption (billion cubic feet per day)
Residential Sector 11.34 13.54 13.87 12.86
Commercial Sector 7.91 9.02 9.37 8.73
Industrial Sector 19.74 20.44 21.27 22.14
Electric Power Sector 24.89 22.34 21.88 22.76
Total Consumption 69.76 71.34 72.62 72.79
Primary Assumptions (percent change from previous year)
Heating Degree Days -12.6 18.5 1.0 -6.4
Cooling Degree Days 1.7 -12.7 1.6 2.8
Commercial Employment 2.2 2.2 2.1 2.0
Natural-gas-weighted Industrial Production 2.2 1.8 2.0 3.3

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