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Short-Term Energy and Summer Fuels Outlook

Release Date: April 12, 2016  |  Next Release Date: May 10, 2016  |  Full Report    |   Text Only   |   All Tables   |   All Figures

Natural Gas

Working natural gas inventories in storage ended the winter withdrawal season at 2,478 billion cubic feet (Bcf), slightly above the previous record high for the end of March set in 2012. The winter heating season was characterized by warmer-than-normal temperatures, continued high production volumes, and low natural gas prices. Looking forward to the summer, EIA projects record-high levels of consumption of natural gas for power generation.

Natural Gas Consumption

EIA's forecast of U.S. total natural gas consumption averages 76.2 Bcf per day (Bcf/d) in 2016 and 77.6 Bcf/d in 2017, compared with 75.3 Bcf/d in 2015. In 2016, increases in the electric power sector primarily drive increases in total consumption. Forecast electric power sector use of natural gas increases by 3.9% in 2016, then declines by 1.3% in 2017, as natural gas prices rise. Forecast industrial sector consumption of natural gas increases by 2.7% in 2016 and by 2.2% in 2017, as new fertilizer and chemical projects come online.

Natural Gas Production and Trade

In January 2016, total marketed production of natural gas averaged 79.0 Bcf/d, an increase of nearly 1% from its December 2015 level. Production in Pennsylvania and West Virginia (two states with Marcellus production) increased substantially from December 2015 levels, offsetting production declines in other areas, particularly in Texas. EIA survey data have shown some production flattening on a national level, and EIA projects relatively low production growth through most of 2016, as low natural gas prices and declining rig activity begin to affect production. At the end of this year and into 2017, however, production growth is expected to rise in response to increases in price, industrial demand, and liquefied natural gas (LNG) exports.

EIA expects growth in U.S. natural gas production through 2017 to reduce demand for natural gas imports from Canada. 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. EIA projects gross LNG exports will average 1.3 Bcf/d in 2017, as Sabine Pass ramps up its capacity.

Natural Gas Inventories

End-of-March natural gas working inventories were 2,478 Bcf. The estimated end-of-March inventory level this year is the highest end-of-season level on record, slightly above the previous record, set in 2012. March 2016 was much warmer than normal, and the milder weather limited inventory withdrawals. Looking ahead to the start of next winter, EIA forecasts inventories to be 4,112 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 $1.73/MMBtu in March, a decline of 26 cents/MMBtu from the February price. Warmer-than-normal temperatures through most of the winter, record inventory levels, and production growth have contributed to sustained low natural gas prices. 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 $2.18/MMBtu in 2016 and $3.02/MMBtu in 2017.

Natural gas futures contracts for July 2016 delivery that were traded during the five-day period ending April 7 averaged $2.16/MMBtu. Current options and futures prices imply that market participants place the lower and upper bounds for the 95% confidence interval for July 2016 contracts at $1.48/MMBtu and $3.14/MMBtu, respectively. In early April 2015, the natural gas futures contract for July 2015 delivery averaged $2.76/MMBtu, and the corresponding lower and upper limits of the 95% confidence interval were $1.90/MMBtu and $4.00/MMBtu.

U.S. Natural Gas Summary
  2014 2015 2016 2017
Prices (dollars per thousand cubic feet)
Henry Hub Spot 4.52 2.71 2.25 3.11
Residential Sector 10.94 10.36 9.64 10.05
Commercial Sector 8.87 7.88 7.15 7.95
Industrial Sector 5.55 3.84 3.27 4.15
Supply (billion cubic feet per day)
Marketed Production 74.89 78.94 79.64 81.35
Dry Gas Production 70.49 74.23 74.76 76.36
Pipeline Imports 7.22 7.20 6.72 6.70
LNG Imports 0.16 0.25 0.18 0.12
Consumption (billion cubic feet per day)
Residential Sector 13.94 12.64 12.08 12.81
Commercial Sector 9.50 8.78 8.68 9.10
Industrial Sector 20.89 20.57 21.12 21.57
Electric Power Sector 22.32 26.50 27.54 27.17
Total Consumption 73.14 75.27 76.24 77.62
Primary Assumptions (percent change from previous year)
Heating Degree Days 1.9 -10.2 -3.1 6.7
Cooling Degree Days -0.7 14.6 -5.0 1.0
Commercial Employment 2.2 2.6 2.0 1.4
Natural-gas-weighted Industrial Production 0.9 1.2 0.7 3.3

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