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Short-Term Energy Outlook

Release Date: June 9, 2015  |  Next Release Date: July 7, 2015  |  Full Report    |   Text Only   |   All Tables   |   All Figures

Natural Gas

The spot price of natural gas at Henry Hub averaged $2.85/ million British thermal units (MMBtu) in May, after averaging $2.61/MMBtu in April. EIA expects monthly average natural gas prices to rise somewhat through the summer as air-conditioning demand increases, but remain below $4/MMBtu throughout the forecast period. While freeze-offs hampered some production this past winter, preliminary data sources indicate natural gas production growth resumed in April and May. EIA forecasts July production will exceed the previous monthly record set in December 2014.

Working natural gas inventories increased by 132 Bcf for the week ending May 29. Following last week's build, natural gas inventories exceeded the previous five-year average for only the second time since late 2013.

Natural Gas Consumption

EIA's forecast of U.S. total natural gas consumption averages 76.7 Bcf per day (Bcf/d) in 2015 and 76.6 Bcf/d in 2016, compared with 73.5 Bcf/d in 2014. Consumption growth in 2015 is largely driven by demand in the industrial and electric power sectors. EIA projects natural gas consumption in the power sector to grow by 13.7% in 2015 and then fall by 2.7% in 2016. Low natural gas prices support increased use of natural gas for electricity generation in 2015. Industrial sector consumption increases by 3.6% in both 2015 and 2016, as new industrial projects come online, particularly in the fertilizer and chemicals sectors, and as industrial consumers continue to take advantage of low natural gas prices. Consumption of natural gas in the residential and commercial sectors is projected to decline in 2015 and 2016.

Natural Gas Production and Trade

EIA expects that marketed natural gas production will increase by 4.2 Bcf/d (5.7%) and by 1.6 Bcf/d (2.0%) in 2015 and 2016, respectively. This month's STEO lowers the 2015 production outlook by 0.3 Bcf/d to reflect revisions in historical data. However, production remains high and EIA expects continued growth through 2016, with increases in the Lower 48 states expected to more than offset the long-term declining production in the Gulf of Mexico. Increases in drilling efficiency will continue to support growing natural gas production in the forecast despite relatively low natural gas prices. Most growth is expected to come from the Marcellus Shale, as a backlog of drilled wells is completed and new pipelines come online to deliver Marcellus gas to markets in the Northeast. Preliminary data indicate significant production growth in April and the beginning of May.

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.

EIA projects that LNG gross exports will increase to 0.79 Bcf/d in 2016, with the startup of a major LNG liquefaction plant in the Lower 48.

Natural Gas Inventories

On May 29, natural gas working inventories totaled 2,233 Bcf, which was 751 Bcf (51%) above the level at the same time in 2014 and 22 Bcf (1%) above the previous five-year (2010-14) average for that week. So far during the inventory refill season, injections have surpassed the five-year average injections by a wide margin. EIA projects end-of-October 2015 inventories will total 3,912 Bcf, 115 Bcf above the five-year average for that time.

Natural Gas Prices

The Henry Hub natural gas spot price averaged $2.85/MMBtu in May, an increase of 24¢/MMBtu from the April price. EIA expects monthly average spot prices to remain lower than $3/MMBtu through June, and lower than $4/MMBtu through the remainder of the forecast. The projected Henry Hub natural gas price averages $2.97/MMBtu in 2015 and $3.32/MMBtu in 2016.

Natural gas futures contracts for September 2015 delivery traded during the five-day period ending June 4 averaged $2.69/MMBtu. Current options and futures prices imply that market participants place the lower and upper bounds for the 95% confidence interval for September 2015 contracts at $1.79/MMBtu and $4.03/MMBtu, respectively. At this time last year, the natural gas futures contract for September 2014 delivery averaged $4.58/MMBtu and the corresponding lower and upper limits of the 95% confidence interval were $3.54/MMBtu and $5.92/MMBtu.

U.S. Natural Gas Summary
  2013 2014 2015 2016
Prices (dollars per thousand cubic feet)
Henry Hub Spot 3.84 4.52 3.06 3.42
Residential Sector 10.30 10.94 10.23 10.38
Commercial Sector 8.08 8.87 8.00 8.34
Industrial Sector 4.64 5.53 4.15 4.44
Supply (billion cubic feet per day)
Marketed Production 70.39 74.72 78.96 80.56
Dry Gas Production 66.67 70.46 74.43 75.92
Pipeline Imports 7.63 7.22 7.04 6.69
LNG Imports 0.27 0.16 0.23 0.15
Consumption (billion cubic feet per day)
Residential Sector 13.46 13.89 13.39 13.27
Commercial Sector 8.98 9.48 9.10 8.91
Industrial Sector 20.31 20.97 21.73 22.52
Electric Power Sector 22.44 22.33 25.38 24.70
Total Consumption 71.69 73.48 76.73 76.63
Primary Assumptions (percent change from previous year)
Heating Degree Days 18.5 1.9 -3.0 -4.2
Cooling Degree Days -12.6 -0.4 7.3 -2.0
Commercial Employment 2.1 2.2 2.4 1.5
Natural-gas-weighted Industrial Production 1.8 2.2 1.3 2.8

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