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Short-Term Energy Outlook

Release Date: December 9, 2014  |  Next Release Date: January 13, 2015  |  Full Report    |   Text Only   |   All Tables   |   All Figures

Natural Gas

After a record injection season, the 162-Bcf storage withdrawal for the week ending November 21 tied the record set last year for the largest November withdrawal. The large withdrawal reflected unseasonably cold weather east of the Rocky Mountains. As a result, this month's STEO revises downward end-of-March 2015 inventories to 1,431 Bcf, based on NOAA expectations that temperatures for the rest of the winter will be close to normal. EIA expects the Henry Hub natural gas spot price to average $3.98/MMBtu this winter, close to last month's forecast.

Natural Gas Consumption

EIA expects total natural gas consumption to average 73.9 Bcf/d in 2014, an increase of 3.2% from 2013 and 1% higher than in last month's STEO. This upward revision largely reflects colder-than-forecast temperatures in November. In 2015, total natural gas consumption is expected to decline as lower residential and commercial consumption offset increases in the electric power and industrial sectors. Natural gas consumption in the power sector is expected to average 22.1 Bcf/d in 2014, a 0.8% decline compared to last year, reflecting higher natural gas prices this year. EIA expects natural gas consumption in the power sector to increase to 22.7 Bcf/d in 2015.

Natural Gas Production and Trade

EIA expects natural gas marketed production to grow by an annual rate of 5.5% in 2014 and 3.1% in 2015. EIA projects that the strong increases already seen in the Lower 48 states for most of this year will continue through 2015, more than offsetting the long-term trend of declining production in the Gulf of Mexico. As of September, the most recent month for which EIA data are available, dry natural gas production was 4.6 Bcf/d greater than it was in September 2013. Production usually declines in September due to seasonal maintenance; however, production this year increased slightly from August to September.

Growing domestic natural gas production is expected to reduce demand for imports from Canada and spur exports to Mexico. EIA expects exports to Mexico, particularly from the Eagle Ford Shale in South Texas, to increase because of growing demand from Mexico's electric power sector and flat Mexican production.

Liquefied natural gas (LNG) imports have fallen over the past four years because higher prices in Europe and Asia are more attractive to LNG exporters than the relatively low prices in the United States. EIA projects that the United States will become a net LNG exporter when Cheniere's LNG liquefaction plant begins service.

Natural Gas Inventories

Natural gas working inventories totaled 3,410 Bcf as of November 28, which was 227 Bcf lower than at the same time last year and 372 Bcf lower than the previous five-year (2009-13) average. Following last year's extremely cold winter, inventories fell to about 1,000 Bcf below the five-year average in mid-April. After a strong injection season, inventories were 237 Bcf below the five-year average on November 7. EIA projects that end-of-March 2015 inventories will total 1,431 Bcf, which is 225 Bcf below the five-year (2010-14) average.

Natural Gas Prices

The Henry Hub natural gas spot price averaged $4.12/MMBtu in November, an increase of 34 cents from October. EIA expects spot prices to remain above $4/MMBtu through January. Projected Henry Hub natural gas prices average $4.44/MMBtu in 2014 and $3.83/MMBtu in 2015.

Natural gas futures prices for March 2015 delivery (for the five-day period ending December 4) averaged $3.84/MMBtu. Current options and futures prices imply that market participants place the lower and upper bounds for the 95% confidence interval for March 2015 contracts at $2.40/MMBtu and $6.13/MMBtu, respectively. At this time last year, the natural gas futures contract for March 2014 averaged $3.98/MMBtu and the corresponding lower and upper limits of the 95% confidence interval were $3.01/MMBtu and $5.26/MMBtu.

U.S. Natural Gas Summary
  2012 2013 2014 2015
Prices (dollars per thousand cubic feet)
Henry Hub Spot 2.83 3.84 4.58 3.94
Residential Sector 10.65 10.30 10.97 10.96
Commercial Sector 8.11 8.08 8.95 9.00
Industrial Sector 3.88 4.64 5.50 4.89
Supply (billion cubic feet per day)
Marketed Production 69.08 70.39 74.26 76.58
Dry Gas Production 65.66 66.67 70.01 72.11
Pipeline Imports 8.10 7.63 7.16 6.94
LNG Imports 0.48 0.27 0.17 0.17
Consumption (billion cubic feet per day)
Residential Sector 11.34 13.46 14.08 12.86
Commercial Sector 7.91 8.98 9.44 8.83
Industrial Sector 19.74 20.31 21.22 22.08
Electric Power Sector 24.89 22.34 22.15 22.75
Total Consumption 69.78 71.59 73.87 73.39
Primary Assumptions (percent change from previous year)
Heating Degree Days -12.5 18.5 3.8 -8.2
Cooling Degree Days 1.7 -12.7 -0.6 5.5
Commercial Employment 2.2 2.2 2.1 2.1
Natural-gas-weighted Industrial Production 2.2 1.8 1.8 2.3

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