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Short-Term Energy Outlook

Release Date: June 12, 2018  |  Next Release Date: July 10, 2018  |  Full Report    |   Text Only   |   All Tables   |   All Figures

Natural Gas

Prices: The front-month natural gas futures contract for delivery at the Henry Hub settled at $2.93/million British thermal units (MMBtu) on June 7, an increase of 13 cents/MMBtu from May 1 (Figure 8). This year, the coldest April in the past 21 years resulted in a delayed start to the summer injection season. The 2018 summer injection season did not start until April 27, four weeks later than in 2017. Working natural gas stocks as of June 1 were 1,817 billion cubic feet (Bcf), 31% lower than the year-ago level and 22% lower than the five-year (2013–17) average for that time of year. The large working natural gas inventory deficit and the late start to the storage injection season contributed to higher Henry Hub prices despite record production growth. EIA estimates that dry natural gas production in May reached 81.3 Bcf per day, 13% higher than in May 2017. EIA projects dry natural gas production to increase by 10% in 2018 and by 3% in 2019. The Henry Hub natural gas spot price averaged $2.80/MMBtu in May, the same price as in April.

Figure 8: Historical ULSD front-month futures price and crack spread

The difference between the Henry Hub and Tennessee Zone 4 (TZ4) spot prices, which reflect prices in northeast Pennsylvania, narrowed in November 2017 but began widening again in April 2018, falling below -$2/MMBtu before settling at -$1.23/MMBtu on June 4 (Figure 9). The TZ4 to Henry Hub spot price spread tends to narrow during winter months when regional demand is higher and to widen during the summer season when demand is lower. The spread also may be widening because pipeline takeaway capacity is constrained in northeast Pennsylvania. The Atlantic Sunrise project, which will connect producing regions in northeastern Pennsylvania to markets in the U.S. Mid-Atlantic and U.S. Southeast, is under construction with an expected start date of mid-2018. Once that project is completed, the TZ4 to Henry Hub spot price spread is likely to narrow.

Figure 9: Historical front-month U.S. natural gas prices

U.S. Natural Gas Summary
  2016201720182019
Prices (dollars per thousand cubic feet)
Henry Hub Spot 2.613.103.103.19
Residential Sector 10.0410.9210.5710.91
Commercial Sector 7.297.877.898.03
Industrial Sector 3.524.144.164.26
Supply (billion cubic feet per day)
Marketed Production 77.8178.9487.2690.27
Dry Gas Production 72.8573.5781.2083.78
Pipeline Imports 7.978.127.917.91
LNG Imports 0.240.210.230.22
Consumption (billion cubic feet per day)
Residential Sector 11.8712.1213.4913.20
Commercial Sector 8.488.709.309.13
Industrial Sector 21.1021.6522.0222.04
Electric Power Sector 27.2825.3427.7327.64
Total Consumption 75.1074.2279.5779.41
Primary Assumptions (percent change from previous year)
Heating Degree Days -5.1-1.211.8-1.5
Cooling Degree Days 4.7-8.6-1.7-2.1
Commercial Employment 2.21.81.71.4
Natural-gas-weighted Industrial Production 1.12.82.03.1