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Short-Term Energy Outlook

Release Date: September 7, 2016  |  Next Release Date: October 12, 2016  |  Full Report    |   Text Only   |   All Tables   |   All Figures

Natural Gas

Working natural gas inventories were 3,401 billion cubic feet (Bcf) as of August 26, which is 8% higher than the same time last year. Injections during the refill season have been below the five-year (2011-15) average levels in most weeks because of the high use of natural gas for electricity generation. However, because warm weather last winter left inventories at record-high levels going into the injection season, current natural gas stock levels remain substantially higher than year-ago and five-year-average levels.

Natural Gas Consumption

EIA's forecast of total natural gas consumption averages 76.4 Bcf/d in 2016 and 77.1 Bcf/d in 2017, compared with 75.2 Bcf/d in 2015. In 2016, increases in total natural gas consumption are mainly because of electric power sector use of natural gas, which is expected to increase by 5.4%. Forecast natural gas use in the electric power sector declines by 2.3% in 2017, as rising natural gas prices contribute to increasing coal use for electricity generation. Forecast industrial sector consumption of natural gas increases by 2.3% in 2016 and by 1.0% in 2017, as new fertilizer and chemical projects come online.

Natural Gas Production and Trade

EIA's natural gas marketed production in June, the month of the most recent survey data, averaged 77.5 Bcf/d, which is down 2.7 Bcf/d from the record-high daily average production in February 2016. However, more recent preliminary daily data from third-party sources indicate production increased in July and August. EIA forecasts production increases in the second half of 2016 and through 2017 in response to forecast increases in prices and in liquefied natural gas (LNG) exports. Forecast natural gas production rises by 0.6% in 2016 and by 3.0% in 2017.

Natural gas pipeline exports to Mexico have risen in 2016. EIA expects that growth to continue because of growing demand from Mexico's electric power sector and because of flat natural gas production in Mexico. Gross pipeline exports are expected to increase by 0.7 Bcf/d in 2016 to an average of 5.6 Bcf/d before declining slightly in 2017.

EIA projects that LNG gross exports will rise 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. Sabine's second train is currently in the commissioning process. EIA projects that gross LNG exports will average 1.5 Bcf/d in 2017, as Sabine Pass ramps up capacity.

With expected growth in gross exports, net imports of natural gas decline from 2.6 Bcf/d in 2015 to 0.2 Bcf/d in 2017. The United States is expected to become a net exporter of natural gas beginning in the second quarter of 2017.

Natural Gas Inventories

Natural gas inventories in March ended at 2,496 Bcf, the highest end-of-withdrawal-season level on record. As of August 26, natural gas inventories were at 3,401 Bcf. Despite lower-than-average storage injections, EIA forecasts natural gas inventories to be 4,042 Bcf at the end of October 2016, which would be a record-high level for that time of year.

Natural Gas Prices

The Henry Hub natural gas spot price averaged $2.82/million British thermal units (MMBtu) in August, unchanged from the July average. A hot summer and production declines have put some upward pressure on natural gas prices, although prices remain low enough to support significant natural gas-fired generation. EIA expects natural gas prices to gradually rise through the forecast period. Forecast Henry Hub prices average $2.42/MMBtu in 2016 and $2.87/MMBtu in 2017.

Natural gas futures contracts for December 2016 delivery that were traded during the five-day period ending September 1 averaged $3.18/MMBtu. Current options and futures prices indicate that market participants place the lower and upper bounds for the 95% confidence interval for December 2016 contracts at $2.25/MMBtu and $4.51/MMBtu, respectively. In early September 2015, the natural gas futures contracts for December 2015 delivery averaged $2.91/MMBtu, and the corresponding lower and upper limits of the 95% confidence interval were $2.08/MMBtu and $4.06/MMBtu.

U.S. Natural Gas Summary
  2014 2015 2016 2017
Prices (dollars per thousand cubic feet)
Henry Hub Spot 4.52 2.71 2.50 2.95
Residential Sector 10.94 10.36 10.06 10.79
Commercial Sector 8.87 7.88 7.34 8.13
Industrial Sector 5.55 3.92 3.54 4.08
Supply (billion cubic feet per day)
Marketed Production 74.89 78.77 79.21 81.56
Dry Gas Production 70.49 74.06 74.06 76.14
Pipeline Imports 7.22 7.20 7.47 6.92
LNG Imports 0.16 0.25 0.22 0.20
Consumption (billion cubic feet per day)
Residential Sector 13.94 12.65 12.06 12.64
Commercial Sector 9.50 8.79 8.56 8.99
Industrial Sector 20.89 20.52 20.99 21.20
Electric Power Sector 22.32 26.50 27.92 27.28
Total Consumption 73.14 75.23 76.38 77.12
Primary Assumptions (percent change from previous year)
Heating Degree Days 1.9 -10.3 -2.3 4.1
Cooling Degree Days -0.7 14.8 0.0 -5.7
Commercial Employment 2.1 2.5 2.2 1.5
Natural-gas-weighted Industrial Production -0.8 1.3 0.7 2.4

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