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Short-Term Energy Outlook

Release Date: August 8, 2017  |  Next Release Date: Septemeber 12, 2017  |  Full Report    |   Text Only   |   All Tables   |   All Figures

Natural Gas

Prices: The front-month natural gas futures contract for delivery at Henry Hub settled at $2.80 per million British thermal units (MMBtu) on August 3, a decrease of 15 cents/MMBtu from July 3 (Figure 8). Natural gas futures prices fell during the second half of July and the beginning of August as weather models forecasted below-normal temperatures in much of the eastern half of the country for the first half of August. The Henry Hub natural gas spot price averaged $2.98/MMBtu in July, almost unchanged compared with the June average.

Figure 8: Actual minus historical average HDD and CDD

Regional markets: Natural gas production in the Marcellus and Utica shales has risen substantially in recent years, often outpacing the growth of natural gas pipeline capacity. This growth has pushed regional natural gas prices lower relative to the benchmark Henry Hub price. The front-month basis swap (the difference between a regional natural gas price and the price at Henry Hub in Louisiana) for Dominion South in southeast Pennsylvania was -$1.20/MMBtu as of August 3 (Figure 9), down from the average basis of -50 cents/MMBtu from January through May 2017. This price decrease reflects constrained pipeline takeaway capacity, which drives producers to lower their natural gas prices. Prior increases in takeaway capacity in the region have narrowed the basis. In November 2016, the Algonquin Incremental Market (AIM) expansion began service, and it likely contributed to the basis swap narrowing by more than $1.00/MMBtu. The Dominion South basis swap could remain near -$1.00/MMBtu without new takeaway capacity. However, the Federal Energy Regulatory Commission certified several new natural gas pipeline projects for the region earlier this year. Once new capacity comes on line, especially from the Atlantic Sunrise and Rover pipeline projects, the basis swap with Henry Hub could narrow.

Figure 9: Dominion South front month basis swap

U.S. Natural Gas Summary
  2015 2016 2017 2018
Prices (dollars per thousand cubic feet)
Henry Hub Spot 2.73 2.61 3.17 3.41
Residential Sector 10.36 10.06 11.02 11.07
Commercial Sector 7.90 7.26 7.98 8.17
Industrial Sector 3.91 3.51 4.25 4.47
Supply (billion cubic feet per day)
Marketed Production 78.78 77.31 78.91 83.30
Dry Gas Production 74.14 72.29 73.48 77.34
Pipeline Imports 7.20 7.97 7.91 8.17
LNG Imports 0.25 0.24 0.21 0.21
Consumption (billion cubic feet per day)
Residential Sector 12.63 12.00 12.04 12.79
Commercial Sector 8.76 8.53 8.55 8.92
Industrial Sector 20.64 21.09 21.31 21.81
Electric Power Sector 26.34 27.28 24.47 25.61
Total Consumption 74.65 75.11 72.62 75.79
Primary Assumptions (percent change from previous year)
Heating Degree Days -10.2 -5.1 0.1 8.2
Cooling Degree Days 14.6 4.7 -7.4 0.6
Commercial Employment 2.4 2.2 1.7 1.3
Natural-gas-weighted Industrial Production -2.0 1.1 2.5 2.9