‹ Analysis & Projections

Short-Term Energy and Summer Fuels Outlook

Release Date: April 7, 2015  |  Next Release Date: May 12, 2015  |  Full Report    |   Text Only   |   All Tables   |   All Figures

Natural Gas

Working gas in storage ended this year's heating season at an estimated 1,471 Bcf on March 31. A total of 2,116 Bcf of natural gas was withdrawn from storage inventories during this year's heating season, compared to an overall withdrawal of 2,960 Bcf during last year's heating season. Although this year's winter was colder than normal, it was slightly warmer than last year's historically cold winter. Looking ahead to October, EIA projects inventories will end the injection season at 3,781 Bcf, which is slightly below the five-year average. This level would imply overall injections of 2,310 Bcf over the injection season. Strong projected electric power consumption of natural gas this summer are expected to keep injections below last year's refill, but the expected 2,310 Bcf refill is still significant compared with past years.

Natural Gas Consumption

EIA projects that U.S. total natural gas consumption will average 76.3 billion cubic feet per day (Bcf/d) in 2015 and 75.8 Bcf/d in 2016, compared with an estimated 73.5 Bcf/d in 2014. Consumption growth is largely driven by demand in the industrial and electric power sectors, while residential and commercial consumption are projected to decline in 2015 and 2016. EIA projects natural gas consumption in the power sector to grow by 11.5% in 2015 and then fall by 2.2% in 2016. Low natural gas prices support increased natural gas-fired electric power consumption in 2015. Industrial sector consumption increases by 4.9% and 2.5% in 2015 and 2016, respectively, as new industrial projects come online, particularly in the fertilizer and chemicals sectors, and as industrial consumers take advantage of low natural gas prices.

Natural Gas Production and Trade

EIA expects that marketed natural gas production will increase by 3.8 Bcf /d (5.0%) and 1.5 Bcf/d (1.9%) in 2015 and 2016, respectively, reflecting continuing production growth in the Lower 48 states, which more than offsets the long-term declining production in the Gulf of Mexico. Although natural gas prices have fallen dramatically in recent months, EIA expects that increases in drilling efficiency and growth in oil production (albeit at a slower rate) will continue to support growing natural gas production in the forecast. With most growth expected to come from the Marcellus Shale, a backlog of drilled but uncompleted wells will continue to support production growth, as new pipelines come online in the Northeast.

Increases in domestic natural gas production are expected to reduce demand for natural gas imports from Canada and to support growth in exports to Mexico. EIA expects exports to Mexico, particularly from the Eagle Ford Shale in South Texas, to increase because of growing demand from Mexico's electric power sector, coupled with flat Mexican natural gas production.

LNG imports have fallen over the past five years because higher prices in Europe and Asia are more attractive to LNG exporters than the relatively low prices in the United States. Forecast LNG gross imports average 0.2 Bcf/d in 2015 and 2016. EIA projects that LNG gross exports will increase from an average of 0.04 Bcf/d in 2014 to over 0.79 Bcf/d in 2016.

Natural Gas Inventories

On March 27, natural gas working inventories totaled 1,461 Bcf, 628 Bcf (75%) above the level at the same time in 2014 and 190 Bcf (12%) below the previous five-year (2010-14) average for the week. A 12 Bcf injection for the week ending March 20 was the first net injection of 2015, although inventories posted a net withdrawal the week ending March 27. EIA projects that end-of-October 2015 inventories will total 3,781 Bcf, 17 Bcf less than the five-year average.

Natural Gas Prices

The Henry Hub natural gas spot price averaged $2.83/MMBtu in March, a decline of 4 cents/MMBtu from February. EIA expects monthly average spot prices to remain less than $3/MMBtu through May, and less than $4/MMBtu through the remainder of the forecast. The projected Henry Hub natural gas price averages $3.07/MMBtu in 2015 and $3.45/MMBtu in 2016.

Natural gas futures contracts for July 2015 delivery traded during the five-day period ending April 2 averaged $2.76/MMBtu. Current options and futures prices imply that market participants place the lower and upper bounds for the 95% confidence interval for July 2015 contracts at $1.90/MMBtu and $4.00/MMBtu, respectively. At this time last year, the natural gas futures contract for July 2014 delivery averaged $4.46/MMBtu and the corresponding lower and upper limits of the 95% confidence interval were $3.40/MMBtu and $5.87/MMBtu.

U.S. Natural Gas Summary
  2013 2014 2015 2016
Prices (dollars per thousand cubic feet)
Henry Hub Spot 3.84 4.52 3.16 3.55
Residential Sector 10.30 10.94 10.33 10.61
Commercial Sector 8.08 8.87 8.26 8.69
Industrial Sector 4.64 5.53 4.20 4.57
Supply (billion cubic feet per day)
Marketed Production 70.39 74.72 78.47 79.96
Dry Gas Production 66.67 70.46 74.09 75.49
Pipeline Imports 7.63 7.22 6.95 6.69
LNG Imports 0.27 0.16 0.21 0.15
Consumption (billion cubic feet per day)
Residential Sector 13.46 13.90 13.51 12.92
Commercial Sector 8.98 9.48 9.03 8.88
Industrial Sector 20.31 20.97 22.01 22.56
Electric Power Sector 22.44 22.33 24.90 24.36
Total Consumption 71.69 73.47 76.34 75.82
Primary Assumptions (percent change from previous year)
Heating Degree Days 18.5 2.0 -3.9 -4.6
Cooling Degree Days -12.6 -0.5 6.5 0.3
Commercial Employment 2.1 2.2 2.6 1.7
Natural-gas-weighted Industrial Production 1.8 2.0 1.7 2.7

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