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Short-Term Energy Outlook

Release Date: September 10, 2019  |  Next Release Date: October 8, 2019  |  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 $2.44 per million British thermal units (MMBtu) on September 5, an increase of 23 cents/MMBtu from August 1 (Figure 9). Natural gas futures prices declined early in August, reaching $2.07/MMBtu on August 5, the lowest price since May 26, 2016, as continued increases in production contributed to inventory gains. As of September 5, natural gas storage injections equaled or exceeded the five-year (2014–18) average in all but two weeks in the 2019 injection season that began in April.

Henry Hub spot prices increased in the second half of August, and EIA forecasts that prices will average $2.44/MMBtu in the fourth quarter of 2019 and $2.55/MMBtu in 2020. EIA estimates that natural gas production increased to a record-high 92.2 billion cubic feet per day (Bcf/d) in August but expects that production will level off, averaging 93.2 Bcf/d in 2020. However, EIA forecasts that liquefied natural gas (LNG) exports, estimated at 3.9 Bcf/d in August, will continue to rise through the forecast, averaging 6.4 Bcf/d in 2020. EIA expects that continued growth of LNG exports combined with flattening production will provide support for natural gas prices through the forecast.

Figure 9: Natural gas front-month futures prices and storage

Ethane prices: On July 31, 2019, ethane spot prices declined to the lowest point on record (Figure 10). Although prices increased in August, the monthly average prices for June through August were the lowest recorded for those months. Ethane inventories rose to 56 million barrels in May 2019 (the latest data available), 14 million barrels more than the five-year average and less than 3 million barrels lower than the November 2017 record high in EIA’s data series, which starts in 2010. The low prices during the summer months indicate that inventories likely have remained high. Ethane produced through natural gas processing continues to increase. Every month since September 2016 has set a production record for that month. Consumption and exports have also increased, but ethane production grew at a faster rate in the first five months of 2019. Although ethane is usually more expensive than natural gas, ethane prices have been lower than natural gas futures prices for more than half of the days from June 1 to September 5. Low ethane prices could make extraction from the natural gas stream cost prohibitive for natural gas processors. Processors will likely leave ethane in the natural gas stream—behavior known as “ethane rejection”—to the extent possible while still meeting the specifications for dry natural gas distribution.

Figure 10: Natural gas futures and ethane prices

U.S. Natural Gas Summary
  2017201820192020
Prices (dollars per thousand cubic feet)
Henry Hub Spot 3.103.272.662.64
Residential Sector 10.8610.4910.5710.55
Commercial Sector 7.867.827.677.53
Industrial Sector 4.104.203.873.75
Supply (billion cubic feet per day)
Marketed Production 79.9989.6998.40100.55
Dry Gas Production 74.7783.3991.3993.19
Pipeline Imports 8.127.707.307.18
LNG Imports 0.210.210.170.22
Consumption (billion cubic feet per day)
Residential Sector 12.0913.6313.8213.59
Commercial Sector 8.679.529.639.38
Industrial Sector 21.7822.7022.9423.72
Electric Power Sector 25.3929.1130.5530.79
Total Consumption 74.3282.0784.5185.34
Primary Assumptions (percent change from previous year)
Heating Degree Days -1.311.80.2-2.6
Cooling Degree Days -8.310.9-9.7-3.2
Commercial Employment 1.71.61.71.6
Natural-gas-weighted Industrial Production 3.32.6-0.9-0.3