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Short-Term Energy Outlook

Release Date: July 8, 2014  |  Next Release Date: August 12, 2014  |  Full Report    |   Text Only   |   All Tables   |   All Figures

Natural Gas

While this year's natural gas injection season began slowly in April, injections into storage during May and June were very strong. According to preliminary data from EIA's Weekly Natural Gas Storage Report, net injections were 100 billion cubic feet (Bcf) or greater for each of the past eight weeks. Over the previous four years, weekly injections during May and June exceeded 100 Bcf on only three occasions. EIA expects injections will slow during July and August as more natural gas goes to the electric power sector to meet air conditioning demand. The strength in storage injections is the result of strong production growth and moderate demand. Marketed production in April set a record high, at 73.5 Bcf/d, according to EIA's most recent data, with the largest increases coming from areas in Texas.

Natural Gas Consumption

EIA expects total natural gas consumption will average 72.4 Bcf/d in 2014, an increase of 1.4% from 2013, led by the industrial sector. In 2015, total natural gas consumption falls by 0.3 Bcf/d as a return to near-normal winter weather contributes to lower residential and commercial consumption. Higher natural gas prices this year contribute to a 1.1% decline in natural gas consumption in the power sector to 22.1 Bcf/d in 2014. EIA expects natural gas consumption in the power sector to increase to 22.8 Bcf/d in 2015 with lower natural gas prices and the retirement of some coal plants.

Natural Gas Production and Trade

EIA expects natural gas marketed production to grow by an average rate of 4.1% in 2014 and 1.2% in 2015. 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 take gas to other market regions. In June, the eastward-flowing Rockies Express Pipeline (REX) began service on its Seneca Lateral pipeline, which will take Marcellus gas westward to the Midwest. REX's parent company, Tallgrass Energy, plans to add bidirectional 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. EIA projects net imports of 3.7 Bcf/d in 2014 and 3.1 Bcf/d in 2015, which would be the lowest level since 1987. Liquefied natural gas (LNG) imports have fallen over the past several years because higher prices in Europe and Asia are more attractive to sellers than the relatively low prices in the United States. Several companies are planning to build liquefaction capacity to export LNG from the United States. Cheniere Energy's Sabine Pass facility is expected to be the first to liquefy natural gas produced in the Lower 48 states for export. It is scheduled to come online in stages beginning in late 2015.

Natural Gas Inventories

Natural gas working inventories totaled 1,929 Bcf as of June 27, which was 666 Bcf lower than the same time last year and 790 Bcf lower than the previous five-year (2009-2013) average. The injection season began somewhat slowly in April, but picked up in May and June with more than 1 Tcf was added to storage. EIA expects working gas stocks will reach around 3,430 Bcf at the end of October, 380 Bcf lower than at the same time last year.

Natural Gas Prices

Natural gas spot prices averaged $4.59/MMBtu at the Henry Hub in June. EIA expects spot prices will remain near current levels until the start of the next winter heating season. Projected Henry Hub natural gas prices average $4.77/MMBtu in 2014 and $4.50/MMBtu in 2015.

Natural gas futures prices for October 2014 delivery (for the five-day period ending July 2) averaged $4.40/MMBtu. Current options and futures prices imply that market participants place the lower and upper bounds for the 95% confidence interval for October 2014 contracts at $3.37/MMBtu and $5.76/MMBtu, respectively. At this time last year, the natural gas futures contract for October 2013 averaged $3.62/MMBtu and the corresponding lower and upper limits of the 95% confidence interval were $2.69/MMBtu and $4.88/MMBtu.

U.S. Natural Gas Summary
  2012 2013 2014 2015
Prices (dollars per thousand cubic feet)
Henry Hub Spot 2.83 3.84 4.91 4.64
Residential Sector 10.69 10.31 11.24 11.85
Commercial Sector 8.09 8.12 9.21 9.75
Industrial Sector 3.88 4.66 5.74 5.64
Supply (billion cubic feet per day)
Marketed Production 69.15 70.18 73.08 73.98
Dry Gas Production 65.73 66.53 69.02 69.88
Pipeline Imports 8.10 7.63 7.82 7.54
LNG Imports 0.48 0.27 0.20 0.22
Consumption (billion cubic feet per day)
Residential Sector 11.34 13.54 13.72 12.71
Commercial Sector 7.91 9.02 9.23 8.63
Industrial Sector 19.74 20.45 21.15 21.72
Electric Power Sector 24.89 22.34 22.09 22.84
Total Consumption 69.76 71.33 72.37 72.09
Primary Assumptions (percent change from previous year)
Heating Degree Days -12.6 18.5 1.0 -6.5
Cooling Degree Days 1.7 -12.7 5.7 -0.4
Commercial Employment 2.2 2.2 2.0 1.8
Natural-gas-weighted Industrial Production 2.2 1.8 2.7 3.3

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