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Short-Term Energy Outlook

Release Date: August 7, 2018  |  Next Release Date: September 11, 2018  |  Full Report    |   Text Only   |   All Tables   |   All Figures
       Notice for August 2018 release

Natural Gas

Prices: The front-month natural gas futures contract for delivery at the Henry Hub settled at $2.82/million British thermal units (MMBtu) on August 2, a decrease of 5 cents/MMBtu from July 2 (Figure 7). The Henry Hub natural gas spot price averaged $2.84/MMBtu in July, 13 cents/MMBtu lower than in June. Both natural gas futures and spot prices fell despite the much hotter-than-normal weather for July. U.S. cooling degree days (CDD) averaged 11% higher than normal for July, which contributed to higher natural gas demand. EIA estimates that natural gas consumption for power generation reached a record high in July. The high demand likely slowed the pace of inventory injections. Natural gas inventories remained 565 billion cubic feet (Bcf) lower than the five-year (2013–17) average for the week ending July 27.

Figure 7: Natural gas front-month futures prices and actual minus historical average HDD and CDD

Production: Despite the record-high natural gas power burn and relatively low natural gas inventory levels, record-high natural gas production growth could be keeping prices from rising. EIA estimates that U.S. dry natural gas production reached 81.8 Bcf per day (Bcf/d) during July 2018, a year-over-year increase of 8.4 Bcf/d (11%) (Figure 8). March through July saw the largest year-on-year increases in natural gas production on record, as drilling productivity improvements contributed to accelerated production growth. EIA expects that natural gas production will continue to increase, reaching 84.3 Bcf/d by the end of 2019.

Figure 8: Natural gas futures prices and year-on-year change in production

First-quarter 2018 financials: Cash flow from operations for 22 U.S. publicly traded oil and natural gas producers whose production is at least 60% natural gas rose to $4 billion in the first quarter of 2018, the highest since the third quarter of 2014 (Figure 9). Natural gas production for this group of companies increased by 12% in the first quarter of 2018 from a year earlier, leading to higher upstream revenue and cash flow from operations even though futures prices fell slightly during this period. Throughout 2017 and the first quarter of 2018, natural gas production steadily increased while capital expenditures remained relatively flat. Cash flow from operations exceeded capital expenditures in the first quarter of 2018 for the first time in five years, which may have contributed to these companies’ decisions to spend more on share repurchases than in any quarter in the past five-year period.

Figure 9: Cash from operations and capital expenditures for 22 U.S. natural gas producers

U.S. Natural Gas Summary
Prices (dollars per thousand cubic feet)
Henry Hub Spot 2.613.103.073.21
Residential Sector 10.0410.9210.6410.87
Commercial Sector 7.297.877.908.02
Industrial Sector 3.524.144.164.29
Supply (billion cubic feet per day)
Marketed Production 77.8178.9487.3090.80
Dry Gas Production 72.8573.5781.1084.10
Pipeline Imports 7.978.127.767.94
LNG Imports
Consumption (billion cubic feet per day)
Residential Sector 11.8712.1213.2312.83
Commercial Sector 8.488.709.048.76
Industrial Sector 21.1021.6522.4922.49
Electric Power Sector 27.2825.3427.8128.03
Total Consumption 75.1074.2279.5779.47
Primary Assumptions (percent change from previous year)
Heating Degree Days -5.1-1.211.0-1.5
Cooling Degree Days 4.7-8.55.2-8.7
Commercial Employment
Natural-gas-weighted Industrial Production