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Short-Term Energy Outlook

Release Date: May 10, 2016  |  Next Release Date: June 7, 2016  |  Full Report    |   Text Only   |   All Tables   |   All Figures

Natural Gas

Marketed natural gas production was 80.1 billion cubic feet per day (Bcf/d) in February 2016, according to the latest Natural Gas Monthly data, which is the second-highest production level on record and an increase of 1.4% from January. Growth was strongest in the Marcellus and Utica production areas. Production in Pennsylvania (measured in Bcf/d) increased by 3.5% from January levels, and production in Ohio and West Virginia increased by 10.7% and by 1.7%, respectively. However, preliminary data since February, including EIA's Drilling Productivity Report, indicate production growth may be slowing because of reduced drilling activity in response to low natural gas prices.

Natural Gas Consumption

EIA's forecast of U.S. total natural gas consumption averages 76.5 Bcf per day (Bcf/d) in 2016 and 77.4 Bcf/d in 2017, compared with 75.3 Bcf/d in 2015. In 2016, natural gas consumption increases in the electric power sector primarily drive increases in total consumption. Forecast electric power sector use of natural gas increases by 4.0% in 2016, then declines by 1.6% in 2017, as natural gas prices rise and contribute to increasing coal generation. Forecast industrial sector consumption of natural gas increases by 2.4% in 2016 and by 2.0% in 2017, as new fertilizer and chemical projects come online.

Natural Gas Production and Trade

Despite recent data showing growing natural gas production in February, more recent preliminary data indicate production may be leveling in the next few months. EIA forecasts relatively unchanged production through the rest of 2016, as low natural gas prices and declining rig activity begin to affect production. In 2017, however, production is expected to rise in response to increases in price, demand, and liquefied natural gas (LNG) exports. Overall, EIA expects production will rise by 0.9% in 2016 and by 2.2% in 2017.

EIA expects natural gas exports by pipeline to Mexico will increase because of growing demand from Mexico's electric power sector and flat natural gas production in Mexico. EIA projects LNG gross exports will increase to an average of 0.5 Bcf/d in 2016, with the startup of Cheniere's Sabine Pass LNG liquefaction plant in Louisiana, which sent out its first cargo in February 2016. EIA projects gross LNG exports will average 1.3 Bcf/d in 2017, as Sabine Pass ramps up its capacity.

Natural Gas Inventories

Inventories in March ended at 2,478 Bcf, the highest end-of-withdrawal-season level on record. The first significant inventory increase of the injection season occurred the week ending April 22, with a 73-Bcf build. Looking to the start of next winter, EIA forecasts inventories to be 4,158 Bcf at the end of October 2016, which would be the highest level on record to begin the heating season.

Natural Gas Prices

The Henry Hub natural gas spot price averaged $1.92/million British thermal units (MMBtu) in April, an increase of 19 cents/MMBtu from the March price. Through the 2015-16 winter, prices remained relatively low because of lower demand as a result of warmer-than-normal temperatures, record inventory levels, and production growth. EIA expects prices will gradually rise through the summer, as demand from the electric power sector increases, but forecast prices remain lower than they were last summer. Monthly average Henry Hub spot prices are forecast to remain lower than $3.00/MMBtu through December 2016. Forecast Henry Hub natural gas prices average $2.25/MMBtu in 2016 and $3.02/MMBtu in 2017.

Natural gas futures contracts for August 2016 delivery that were traded during the five-day period ending May 5 averaged $2.36/MMBtu. Current options and futures prices imply that market participants place the lower and upper bounds for the 95% confidence interval for August 2016 contracts at $1.64/MMBtu and $3.39/MMBtu, respectively. In early May 2015, the natural gas futures contract for August 2015 delivery averaged $2.85/MMBtu, and the corresponding lower and upper limits of the 95% confidence interval were $1.98/MMBtu and $4.11/MMBtu.

U.S. Natural Gas Summary
  2014 2015 2016 2017
Prices (dollars per thousand cubic feet)
Henry Hub Spot 4.52 2.71 2.32 3.11
Residential Sector 10.94 10.36 9.79 10.45
Commercial Sector 8.87 7.88 7.22 8.03
Industrial Sector 5.55 3.84 3.32 4.14
Supply (billion cubic feet per day)
Marketed Production 74.89 78.94 79.62 81.34
Dry Gas Production 70.49 74.24 74.80 76.41
Pipeline Imports 7.22 7.20 6.81 6.70
LNG Imports 0.16 0.25 0.19 0.12
Consumption (billion cubic feet per day)
Residential Sector 13.94 12.64 12.30 12.78
Commercial Sector 9.50 8.78 8.73 9.09
Industrial Sector 20.89 20.57 21.06 21.48
Electric Power Sector 22.32 26.50 27.55 27.12
Total Consumption 73.14 75.27 76.48 77.43
Primary Assumptions (percent change from previous year)
Heating Degree Days 1.9 -10.3 -2.7 6.3
Cooling Degree Days -0.7 14.7 -2.9 -1.3
Commercial Employment 2.1 2.5 2.3 1.6
Natural-gas-weighted Industrial Production -0.8 1.3 1.3 3.3

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