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Short-Term Energy Outlook

Release Date: July 7, 2015  |  Next Release Date: August 11, 2015  |  Full Report    |   Text Only   |   All Tables   |   All Figures

Natural Gas

Preliminary data indicate that natural gas production in the Northeast declined during May and June, contributing to total U.S. natural gas production in June averaging 78.2 Bcf per day (Bcf/d), down 1.2 Bcf/d from the April level. The decline largely reflects maintenance and construction in the Marcellus producing area. Transcontinental Pipeline restricted capacity on segments of its Leidy Line, which flows natural gas produced in the Marcellus Shale to market areas, beginning May 1 and lasting through late June. The capacity restrictions were related to construction on an expansion that will ultimately increase Marcellus takeaway capacity. EIA expects production growth will resume in July.

Natural Gas Consumption

EIA's forecast of U.S. total natural gas consumption averages 76.5 Bcf/d in 2015 and 76.4 Bcf/d in 2016, compared with 73.5 Bcf/d in 2014. Consumption growth in 2015 is largely driven by demand in the industrial and electric power sectors. EIA projects natural gas consumption in the power sector to grow by 12.9% in 2015 and then fall by 2.7% in 2016. Low natural gas prices support increased use of natural gas for electricity generation in 2015. Industrial sector consumption increases by 3.3% in 2015 and by 3.9% in 2016, as new industrial projects come online, particularly in the fertilizer and chemicals sectors, 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 2015 and 2016.

Natural Gas Production and Trade

EIA expects that marketed natural gas production will increase by 4.3 Bcf/d (5.7%) and by 1.6 Bcf/d (2.0%) in 2015 and 2016, respectively. Despite recent declines, natural gas production remains high, and EIA expects continued growth through 2016, with increases in the Lower 48 states expected to more than offset long-term 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 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. 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 Mexican natural gas production.

EIA projects 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 June 26, natural gas working inventories totaled 2,577 Bcf, which was 662 Bcf (35%) above the level at the same time in 2014 and 29 Bcf (1%) above the previous five-year average (2010-14) for that week. To this point in the inventory refill season, injections have surpassed the five-year average injections by a wide margin. EIA projects end-of-October 2015 inventories will total 3,919 Bcf, 121 Bcf (3.2%) above the five-year average for that time.

Natural Gas Prices

The Henry Hub natural gas spot price averaged $2.78/million British thermal units (MMBtu) in June, a decrease of 7 cents/MMBtu from the May price. EIA expects monthly average spot prices to remain lower than $3/MMBtu in July, and lower than $4/MMBtu through the remainder of the forecast. The projected Henry Hub natural gas price averages $2.97/MMBtu in 2015 and $3.31/MMBtu in 2016.

Natural gas futures contracts for October 2015 delivery traded during the five-day period ending July 1 averaged $2.85/MMBtu. Current options and futures prices imply that market participants place the lower and upper bounds for the 95% confidence interval for October 2015 contracts at $1.92/MMBtu and $4.24/MMBtu, respectively. At this time last year, the natural gas futures contract for October 2014 delivery averaged $4.40/MMBtu, and the corresponding lower and upper limits of the 95% confidence interval were $3.37/MMBtu and $5.76/MMBtu, respectively.

U.S. Natural Gas Summary
  2013 2014 2015 2016
Prices (dollars per thousand cubic feet)
Henry Hub Spot 3.84 4.52 3.06 3.41
Residential Sector 10.30 10.94 10.27 10.39
Commercial Sector 8.08 8.87 8.07 8.38
Industrial Sector 4.64 5.53 4.17 4.44
Supply (billion cubic feet per day)
Marketed Production 70.39 74.72 78.97 80.56
Dry Gas Production 66.67 70.46 74.37 75.82
Pipeline Imports 7.63 7.22 7.03 6.69
LNG Imports 0.27 0.16 0.23 0.15
Consumption (billion cubic feet per day)
Residential Sector 13.46 13.89 13.39 13.23
Commercial Sector 8.98 9.48 9.12 8.90
Industrial Sector 20.31 20.97 21.67 22.52
Electric Power Sector 22.44 22.33 25.22 24.54
Total Consumption 71.69 73.48 76.55 76.44
Primary Assumptions (percent change from previous year)
Heating Degree Days 18.5 1.9 -3.3 -4.1
Cooling Degree Days -12.6 -0.5 10.4 -4.7
Commercial Employment 2.1 2.2 2.4 1.6
Natural-gas-weighted Industrial Production 1.8 2.2 0.9 2.4

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