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Analyzing Fundamental Drivers in the US Natural Gas Market

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Part 7
Analyzing Fundamental Drivers in the US Natural Gas Market PART 7 OF 8

US Natural Gas Consumption Rose Last Week

Weekly US natural gas consumption 

Market intelligence company PointLogic reported that US natural gas consumption rose 1.7% from October 6–12, 2016. It’s a key bullish driver for natural gas prices.

Higher natural gas prices have a positive impact on oil and gas producers’ profitabilities such as Cimarex Energy (XEC) and Kosmos Energy (KOS).

US Natural Gas Consumption Rose Last Week

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Gas deliveries to the power sector rose 2% week-over-week, but were flat YoY (year-over-year). To learn about what drives the power sector’s natural gas consumption, read Part 1 of this series.

Gas flows to the residential and commercial segments rose week-over-week, but fell YoY. Gas deliveries to the industrial sector rose week-over-week, but fell YoY. US natural gas consumption fell 2.9%—compared to the same period in 2015.

Gas exports to Mexico rose 3% to 3.3 Bcf per day week-over-week and 3% YoY.

US natural gas consumption estimates in October report 

The EIA (U.S. Energy Information Administration) released its monthly STEO (Short-Term Energy Outlook) report on October 13, 2016. It reported that US natural gas consumption could average 75.9 Bcf (billion cubic feet) per day in 2016 and 76.7 Bcf per day in 2017. US natural gas consumption averaged 74.81 Bcf per day in 2015.

US natural gas consumption estimates in September report

In its September STEO report, the EIA estimated that US natural gas consumption could average 76.4 Bcf per day in 2016 and 77.1 Bcf per day in 2017. US natural gas consumption averaged 75.23 Bcf per day in 2015.

Impact

Demand from the industrial and residential segments could drive the demand for natural gas in 2017. High demand should support natural gas prices. High natural gas prices have a positive impact on oil and gas producers’ earnings such as Cimarex Energy, Kosmos Energy, and Memorial Resources (MRD). We’ll discuss natural gas price forecasts in the final part of this series.

Volatility in oil and gas prices impacts funds such the Direxion Daily Natural Gas Related Bull 3X Shares ETF (GASL), the VelocityShares 3x Long Crude Oil ETN (UWTI), the United States Natural Gas ETF (UNG), the PowerShares DWA Energy Momentum ETF (PXI), and the Vanguard Energy ETF (VDE).

In the next part of this series, we’ll discuss natural gas price forecasts.

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