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Short-Term Energy Outlook

Release Date: September 9, 2015  |  Next Release Date: October 6, 2015  |  Full Report    |   Text Only   |   All Tables   |   All Figures

Natural Gas

Total weekly natural gas storage injections from the beginning of the injection season through August 28 were 1,732 billion cubic feet (Bcf), compared with the five-year (2010-14) average of 1,420 for the same time period. However, 2015 injections have been 8% lower than last year's record injections of 1,887 for the same weeks. The largest injections occurred earlier in the injection season, with injections in recent weeks closer to the five-year average. Production growth has been the main driver of strong inventory builds this year.

Natural Gas Consumption

EIA's forecast of U.S. total natural gas consumption averages 76.5 Bcf/d in 2015 and 76.6 Bcf/d in 2016, compared with 73.5 Bcf/d in 2014. EIA projects natural gas consumption in the power sector to increase by 14.4% in 2015 and then decrease by 3.3% in 2016. Natural gas prices, which are expected to remain below $3 per million British thermal units (MMBtu) through November, support increased use of natural gas for electricity generation in 2015. Industrial sector consumption increases by 0.9% in 2015 and by 6.4% in 2016, as new industrial projects, particularly in the fertilizer and chemicals sectors, come online late this year and next year, and as industrial consumers continue to take advantage of low natural gas prices. Natural gas consumption in the residential and commercial sectors is projected to decline in both 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 1.7 Bcf/d (2.2%) in 2015 and 2016, respectively. EIA expects moderate production growth through 2016, with increases in the Lower 48 states expected to more than offset continuing production declines 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 of the growth is expected to come from the Marcellus Shale as the backlog of uncompleted wells is reduced and as new pipelines come online to deliver Marcellus natural gas to markets 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. Earlier this year, natural gas net imports fell to the lowest monthly level since 1987, averaging 2.3 Bcf/d in both May and June. EIA expects natural gas 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 natural gas production in Mexico.

EIA projects liquefied natural gas (LNG) gross exports will increase to an average of 0.79 Bcf/d in 2016, with the startup of a major LNG liquefaction plant in the Lower 48 states.

Natural Gas Inventories

On August 28, natural gas working inventories totaled 3,193 Bcf, 495 Bcf (18%) above the level at the same time in 2014 and 122 Bcf (4%) above the five-year average for that week. EIA projects end-of-October 2015 inventories will total 3,840 Bcf, which would be 43 Bcf above the five-year average.

Natural Gas Prices

The Henry Hub natural gas spot price averaged $2.77/MMBtu in August, a decrease of 7 cents/MMBtu from the July price. The current STEO lowers the projection for prices slightly from last month's forecast; monthly average spot prices remain lower than $3/MMBtu through November, and lower than $4/MMBtu through the remainder of the forecast. The projected Henry Hub natural gas price averages $2.84/MMBtu in 2015 and $3.11/MMBtu in 2016.

Natural gas futures contracts for December 2015 delivery traded during the five-day period ending September 3 averaged $2.91/MMBtu. Current options and futures prices imply that market participants place the lower and upper bounds for the 95% confidence interval for December 2015 contracts at $2.08/MMBtu and $4.06/MMBtu, respectively. At this time in 2014, the natural gas futures contract for December 2014 delivery averaged $4.07 /MMBtu, and the corresponding lower and upper limits of the 95% confidence interval were $3.09/MMBtu and $5.35/MMBtu, respectively.

U.S. Natural Gas Summary
  2013 2014 2015 2016
Prices (dollars per thousand cubic feet)
Henry Hub Spot 3.84 4.52 2.93 3.20
Residential Sector 10.30 10.94 10.33 10.25
Commercial Sector 8.08 8.87 8.06 8.27
Industrial Sector 4.64 5.53 4.05 4.23
Supply (billion cubic feet per day)
Marketed Production 70.39 74.72 78.95 80.68
Dry Gas Production 66.67 70.46 74.31 75.89
Pipeline Imports 7.63 7.22 7.05 6.68
LNG Imports 0.27 0.16 0.21 0.15
Consumption (billion cubic feet per day)
Residential Sector 13.46 13.90 13.51 13.19
Commercial Sector 8.98 9.48 9.14 8.90
Industrial Sector 20.31 20.97 21.17 22.52
Electric Power Sector 22.44 22.33 25.54 24.71
Total Consumption 71.69 73.48 76.52 76.60
Primary Assumptions (percent change from previous year)
Heating Degree Days 18.5 1.9 -3.6 -4.4
Cooling Degree Days -12.6 -0.6 8.4 -2.8
Commercial Employment 2.1 2.2 2.5 1.4
Natural-gas-weighted Industrial Production 1.8 2.2 1.4 2.5

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