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Short-Term Energy and Summer Fuels Outlook

Release Date: April 8, 2014  |  Next Release Date: May 6, 2014  |  Full Report    |   Text Only   |   All Tables   |   All Figures

Natural Gas

Following late-winter cold weather, working natural gas in storage ended March at an estimated 826 Bcf, the lowest level in 11 years. EIA now expects a large rebuild over the injection season, with inventories ending October at 3,422 Bcf. This represents a record stock build of nearly 2,600 Bcf. Expectations for lower demand from the electric power sector compared with the past several years, as well as increasing production, should help enable a record-high stock build. This month's STEO revises upward the outlook for natural gas marketed production in both 2014 and 2015. While production dipped in the winter months due to freeze-offs in various locations, recent outside data sources indicate production has bounced back and is exceeding record highs set in November.

U.S. Natural Gas Consumption

EIA expects total natural gas consumption will average 72.1 Bcf per day (Bcf/d) in 2014, an increase of 0.7 Bcf/d from 2013. Increased residential, commercial, and industrial use offsets declines from the electric power sector, which are related to higher natural gas prices. In 2015, total natural gas consumption falls by 0.4 Bcf/d as a decline in residential and commercial consumption more than offsets consumption growth in the industrial and electric power sectors. EIA expects natural gas consumption in the power sector to increase to 22.8 Bcf/d in 2015 with the retirement of some coal plants.

U.S. Natural Gas Production and Trade

EIA expects natural gas marketed production will grow by an average rate of 3.0% in 2014 and 1.5% in 2015. Rapid natural gas production growth in the Marcellus formation is contributing to falling natural gas forward prices in the Northeast, which often fall even with or below Henry Hub prices outside of peak winter demand months. Consequently, some drilling activity may move away from the Marcellus back to Gulf Coast plays such as the Haynesville and Barnett, where prices are closer to the Henry Hub spot price.

Liquefied natural gas (LNG) imports have declined 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 planned to be the first to liquefy natural gas produced in the Lower 48 states for export. The facility has a total liquefaction capacity of 3 Bcf/d and is scheduled to come online in stages beginning in late 2015.

Growing domestic production over the past several years has displaced some pipeline imports from Canada, while exports to Mexico have increased. EIA projects net imports of 3.7 Bcf/d in 2014 and 3.0 Bcf/d in 2015, which would be the lowest level since 1987. Over the longer term, the EIA Annual Energy Outlook 2014 projects the United States will be a net exporter of natural gas beginning in 2018.

U.S. Natural Gas Inventories

Natural gas working inventories fell by 74 Bcf to 822 Bcf during the week ending March 28, 2014. Colder-than-normal temperatures and a few late-season winter storms during the month resulted in increased heating demand, prompting larger-than-normal withdrawals. Stocks are now 878 Bcf less than last year at this time and 992 Bcf less than the five-year (2009-13) average for this time of year. Total stocks, as well as stocks in all three regions, are currently less than their five-year (2009-13) minimums.

U.S. Natural Gas Prices

Natural gas spot prices averaged $4.90/MMBtu at the Henry Hub in March, down $1.10/MMBtu from February, as weather in March was less extreme than the previous month, but still colder than normal. EIA projects that spot prices will continue to decline in the spring. Projected Henry Hub natural gas prices average $4.44/MMBtu in 2014 and $4.11/MMBtu in 2015.

Natural gas futures prices for July 2014 delivery (for the five-day period ending April 3, 2014) averaged $4.46/MMBtu. Current options and futures prices imply that market participants place the lower and upper bounds for the 95% confidence interval for July 2014 contracts at $3.40/MMBtu and $5.87/MMBtu, respectively. At this time last year, the natural gas futures contract for July 2013 averaged $4.07/MMBtu and the corresponding lower and upper limits of the 95% confidence interval were $3.16/MMBtu and $5.23/MMBtu.

U.S. Natural Gas Summary
  2012 2013 2014 2015
Prices (dollars per thousand cubic feet)
Henry Hub Spot 2.83 3.84 4.58 4.23
Residential Sector 10.69 10.31 11.07 11.51
Commercial Sector 8.09 8.12 9.12 9.34
Industrial Sector 3.88 4.66 5.41 5.21
Supply (billion cubic feet per day)
Marketed Production 69.15 70.18 72.29 73.34
Dry Gas Production 65.73 66.53 68.45 69.45
Pipeline Imports 8.10 7.63 7.96 7.50
LNG Imports 0.48 0.27 0.23 0.22
Consumption (billion cubic feet per day)
Residential Sector 11.34 13.53 13.87 12.67
Commercial Sector 7.91 9.01 9.11 8.56
Industrial Sector 19.74 20.45 20.91 21.49
Electric Power Sector 24.89 22.34 22.06 22.85
Total Consumption 69.76 71.33 72.07 71.71
Primary Assumptions (percent change from previous year)
Heating Degree Days -12.6 18.5 0.6 -7.5
Cooling Degree Days 1.7 -12.7 5.3 0.4
Commercial Employment 2.2 2.2 1.9 2.1
Natural-gas-weighted Industrial Production 1.7 1.7 2.8 3.5

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