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Short-Term Energy Outlook

Release Date: June 9, 2020  |  Next Release Date: July 7, 2020  |  Full Report    |   Text Only   |   All Tables   |   All Figures

Natural Gas

Prices: The front-month natural gas futures contract at the Henry Hub settled at $1.82 per million British thermal units (MMBtu) on June 4, down 7 cents/MMBtu compared with May 1 (Figure 8).

Figure 8: Natural gas front-month futures prices and actual minus historical average HDD and CDD

EIA estimates that total U.S. natural gas consumption in May 2020 was slightly higher than in May 2019 because of more residential and electric power sector natural gas consumption relative to the same time in 2019. These increases were partly offset by year-over-year decreases in industrial natural gas consumption, which likely occurred because of a slowdown in economic activity related to COVID-19 mitigation efforts. EIA forecasts that both production (including imports) and consumption (including exports) will begin to decline from the middle of 2020 to the end of 2021 and that this version of consumption will exceed production by the end of 2021 (seen as a 12-month moving average in Figure 9). The more rapid decline in production plus imports is expected to provide support for natural gas prices. EIA forecasts that Henry Hub natural gas spot prices will increase for the rest of 2020 and will average $3.08 /MMBtu in 2021, which is higher than the $2.04/MMBtu average for 2020.

Figure 9: Natural gas production plus imports and consumption plus exports, 12-month moving average

Money managers open interest: The net positions taken by money managers in natural gas futures markets reveal these traders’ expectations regarding future movements in contract prices for this market participant category. A short position—selling a futures contract—typically indicates expected price declines because the trader would profit from a decline in prices. Meanwhile, a long position—buying a futures contract—typically indicates expected price increases because a trader would profit from the higher price in the future. On February 4, 2020, following a very mild winter, money managers had accumulated the largest net short position in the history of the Commodity Futures Trading Commission’s (CFTC) weekly report on the commitments of traders. Over the course of April and May 2020, net positions reversed from net short to a marginal net long (Figure 10). The movement was fueled primarily by reduced gross short positions, and the relatively even split between gross short and gross long positions indicates the likely heightened uncertainty in futures markets at the present time.

Figure 10: Money managers open interest in natural gas futures contracts

U.S. Natural Gas Summary
  2018201920202021
Prices (dollars per thousand cubic feet)
Henry Hub Spot 3.272.662.123.20
Residential Sector 10.4610.5610.4610.67
Commercial Sector 7.777.627.267.80
Industrial Sector 4.213.913.164.24
Supply (billion cubic feet per day)
Marketed Production 89.9399.1796.7992.40
Dry Gas Production 83.8092.2189.6585.39
Pipeline Imports 7.707.377.067.92
LNG Imports 0.210.140.180.22
Consumption (billion cubic feet per day)
Residential Sector 13.6913.7012.9613.35
Commercial Sector 9.639.659.149.30
Industrial Sector 22.9522.9820.9821.61
Electric Power Sector 29.0130.9831.5227.21
Total Consumption 82.4084.9781.8778.66
Primary Assumptions (percent change from previous year)
Heating Degree Days 11.80.6-7.13.8
Cooling Degree Days 11.0-5.2-4.4-1.4
Commercial Employment 1.51.4-15.65.4
Natural-gas-weighted Industrial Production 2.6-0.4-10.63.7