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Short-Term Energy Outlook

Release Date: July 11, 2017  |  Next Release Date: August 8, 2017  |  Full Report    |   Text Only   |   All Tables   |   All Figures

Natural Gas

Natural Gas Consumption

Total U.S. natural gas consumption averaged 75.1 billion cubic feet per day (Bcf/d) in 2016. It is forecast to decrease by 2.3 Bcf/d in 2017 and then increase by 2.7 Bcf/d in 2018. In 2017, decreases in total natural gas consumption are mainly attributable to lower electric power sector use, which is forecast to decrease by 2.6 Bcf/d (9.4%) in 2017 and then increase by 0.6 Bcf/d (2.4%) in 2018. The 2017 decline reflects competition from increasing renewable use (particularly hydropower) and competitive coal prices, along with overall lower electricity generation.

Based on forecasts by the National Oceanic and Atmospheric Administration (NOAA), EIA projects 2017 heating degree days (HDD) to be similar to 2016 levels. The first quarters of both years were warmer than normal. EIA expects combined residential and commercial natural gas consumption to be almost unchanged in 2017 compared with 2016 levels and then rise by 1.2 Bcf/d in 2018. Growth in 2018 is largely because of a forecast 8% increase in HDD, based on the NOAA forecast of a return to relatively normal temperatures.

Industrial sector consumption of natural gas increased by 2.2% in 2016, and it is forecast to increase by 1.4% in 2017 and by 2.6% in 2018. Most of the increase in the forecast is attributable to new chemical projects expected to come online. Low natural gas prices in recent years have made it economical to increase the use of natural gas as feedstock in ammonia for nitrogenous fertilizer and methanol manufacturers.

Natural Gas Production and Trade

EIA estimates that dry natural gas production averaged 72.5 Bcf/d in June, which is up 0.9 Bcf/d from the year-ago level. EIA expects production to rise through 2017 and 2018 in response to forecast price increases and large increases in liquefied natural gas (LNG) exports. Overall, EIA expects dry natural gas production to rise by 1.0 Bcf/d in 2017 and by 3.1 Bcf/d in 2018, annual increases of 1.4% and 4.3%, respectively.

Natural gas pipeline exports to Mexico have risen this year, and EIA expects that growth to continue as Mexico undergoes energy market reform. A relatively cheap natural gas export price, rising demand from Mexico, and increased pipeline takeaway capacity in both in the United States and Mexico have led to higher exports. Gross pipeline exports are expected to increase by 0.9 Bcf/d in 2017 and by 0.5 Bcf/d in 2018 to an average of 7.3 Bcf/d.

EIA projects LNG gross exports will average 1.9 Bcf/d in 2017, up from 0.5 Bcf/d in 2016. By the end of 2017, Trains 1 through 4 at Cheniere's Sabine Pass facility in Louisiana are expected to be fully operational, and Cove Point LNG in Maryland is expected to come online. EIA projects gross LNG exports to average 2.8 Bcf/d in 2018, as Sabine Pass and Cove Point ramp up capacity and two new LNG facilities come online. Cameron LNG Train 1 is scheduled to come online in July, followed by Train 2 in November, and Freeport LNG is scheduled to come online in November. Both facilities are along the U.S. Gulf Coast. Cameron LNG Trains 1 and 2 will add 1.1 Bcf/d of new liquefaction capacity, and Freeport Train 1 will add 0.7 Bcf/d of new capacity. The new Cameron and Freeport liquefaction facilities will require a few months to ramp up and are projected to operate below nameplate capacity in 2018.

Total U.S. natural gas imports averaged 8.2 Bcf/d in 2016, and they are expected to average 8.3 Bcf/d in 2017 and 8.8 Bcf/d in 2018.

EIA projects that the United States will become a net exporter of natural gas on average in 2017, with net exports expected to average 0.4 Bcf/d. As LNG exports increase, 2018 net exports are forecast to be 1.3 Bcf/d.

Natural Gas Inventories

Natural gas inventories reached a record high of 4,047 Bcf on November 11, 2016, and inventories ended the winter heating season at 2,072 Bcf in March 2017. Inventory builds have been slightly below average thus far during the injection season, and EIA expects inventories to be 3,940 Bcf at the end of October 2017, which would be 2% higher than the five-year average level for the end of October but 2% lower than the 2016 end-of-October level.

Natural Gas Prices

Henry Hub spot prices have been relatively flat in 2017, averaging $3.04 per million British thermal units (MMBtu) during the first half of the year, which is the same as the fourth quarter of 2016 average price. Prices averaged $2.98/MMBtu in June. Closer-to-normal winter temperatures are expected this winter following last year's warm winter, which contributes to growth in residential and commercial consumption. Also, export growth is forecast to increase in the second half of 2017 and in 2018. Both factors could contribute to modest upward price pressure. Forecast Henry Hub natural gas spot prices average $3.10/MMBtu in 2017 and $3.40/MMBtu in 2018.

Natural gas futures contracts for October 2017 delivery that were traded during the five-day period ending July 6 averaged $2.98/MMBtu. Current options and futures prices indicate that market participants place the lower and upper bounds for the 95% confidence interval for October 2017 contracts at $2.17/MMBtu and $4.08/MMBtu, respectively. Last year at this time, the natural gas futures contracts for October 2016 delivery averaged $2.88/MMBtu, and the corresponding lower and upper limits of the 95% confidence interval were $2.00/MMBtu and $4.14/MMBtu, respectively.

U.S. Natural Gas Summary
  2015 2016 2017 2018
Prices (dollars per thousand cubic feet)
Henry Hub Spot 2.73 2.61 3.22 3.52
Residential Sector 10.36 10.06 10.94 11.07
Commercial Sector 7.90 7.26 8.01 8.27
Industrial Sector 3.91 3.51 4.29 4.59
Supply (billion cubic feet per day)
Marketed Production 78.78 77.31 78.70 82.29
Dry Gas Production 74.14 72.29 73.30 76.42
Pipeline Imports 7.20 7.97 8.11 8.58
LNG Imports 0.25 0.24 0.21 0.21
Consumption (billion cubic feet per day)
Residential Sector 12.63 12.00 11.91 12.80
Commercial Sector 8.76 8.53 8.59 8.95
Industrial Sector 20.64 21.09 21.39 21.94
Electric Power Sector 26.34 27.28 24.70 25.29
Total Consumption 74.65 75.11 72.86 75.57
Primary Assumptions (percent change from previous year)
Heating Degree Days -10.2 -5.1 0.4 8.5
Cooling Degree Days 14.5 4.6 -7.7 -5.5
Commercial Employment 2.4 2.2 1.6 1.3
Natural-gas-weighted Industrial Production -2.0 1.1 3.1 3.1

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