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Short-Term Energy Outlook

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

Natural Gas

Marketed natural gas production was 79.1 billion cubic feet per day (Bcf/d) in March 2016, a 1.0 Bcf/d decline from its record high in February, according to the latest Natural Gas Monthly. Average daily production in Texas, the largest natural gas-producing state, declined, and Marcellus Shale production declined in Pennsylvania, Ohio, and West Virginia. One of the factors contributing to the decline in production was low prices, which fell to an average of $1.73/million British thermal units (MMBtu) in March before rising slightly in April and May. Preliminary data indicate production has risen slightly since March, but it remains lower than previous record highs.

Natural Gas Consumption

EIA's forecast of U.S. total natural gas consumption averages 76.6 Bcf/d in 2016 and 77.8 Bcf/d in 2017, compared with 75.3 Bcf/d in 2015. In 2016, increases in total natural gas consumption are mainly attributable to increases in electric power sector use. Forecast electric power sector use of natural gas increases by 5.1% in 2016, then declines by 1.5% in 2017, as natural gas prices rise and contribute to increasing coal generation. Forecast industrial sector consumption of natural gas increases by 2.7% in 2016 and by 1.7% in 2017, as new fertilizer and chemical projects come online.

Natural Gas Production and Trade

EIA's most recent survey data indicate a decline in natural gas production in March. EIA expects production to rise only slightly through the rest of 2016 because of low natural gas prices and declining rig activity. In 2017, production is expected to rise in response to forecast price increases and increases in liquefied natural gas (LNG) exports. Overall, EIA expects production to rise by 1.0% in 2016 and by 2.3% 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 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. EIA projects gross LNG exports will average 1.3 Bcf/d in 2017, as Sabine Pass ramps up its capacity.

Natural Gas Inventories

Natural gas inventories in March ended at 2,492 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. For the past several weeks, injections have been somewhat lower than the previous five-year (2011-15) average. Looking to the start of next winter, EIA forecasts natural gas inventories to be 4,161 Bcf at the end of October 2016, which would be the highest level on record to begin the heating season. Although EIA projects lower-than-average injections, the record-high starting point of the injection season allows for a projected end-of-October record high.

Natural Gas Prices

The Henry Hub natural gas spot price averaged $1.92/MMBtu in May, unchanged from the average price in April. 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 natural gas 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 the end of 2016. Forecast Henry Hub natural gas prices average $2.22/MMBtu in 2016 and $2.96/MMBtu in 2017.

Natural gas futures contracts for September 2016 delivery that were traded during the five-day period ending June 2 averaged $2.42/MMBtu. Current options and futures prices imply that market participants place the lower and upper bounds for the 95% confidence interval for September 2016 contracts at $1.64/MMBtu and $3.58/MMBtu, respectively. In early June 2015, the natural gas futures contract for September 2015 delivery averaged $2.69/MMBtu, and the corresponding lower and upper limits of the 95% confidence interval were $1.79/MMBtu and $4.03/MMBtu.

U.S. Natural Gas Summary
  2014 2015 2016 2017
Prices (dollars per thousand cubic feet)
Henry Hub Spot 4.52 2.71 2.29 3.05
Residential Sector 10.94 10.36 9.80 10.42
Commercial Sector 8.87 7.88 7.19 7.99
Industrial Sector 5.55 3.84 3.29 4.10
Supply (billion cubic feet per day)
Marketed Production 74.89 78.77 79.58 81.38
Dry Gas Production 70.49 74.06 74.64 76.32
Pipeline Imports 7.22 7.20 6.90 6.74
LNG Imports 0.16 0.25 0.20 0.12
Consumption (billion cubic feet per day)
Residential Sector 13.94 12.64 12.14 12.78
Commercial Sector 9.50 8.78 8.65 9.09
Industrial Sector 20.89 20.57 21.13 21.48
Electric Power Sector 22.32 26.50 27.85 27.44
Total Consumption 73.14 75.26 76.63 77.81
Primary Assumptions (percent change from previous year)
Heating Degree Days 1.9 -10.3 -2.1 4.2
Cooling Degree Days -0.7 14.7 -3.7 -1.9
Commercial Employment 2.1 2.5 2.4 1.8
Natural-gas-weighted Industrial Production -0.8 1.3 1.6 3.1

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