EIA increases natural gas consumption estimates

The Energy Information Administration (or EIA) projects higher natural gas consumption in 2014 and 2015. Compared to 71.59 billion cubic feet per day (or bcf/d) in 2013, consumption could increase ~3% to 73.87 bcf/d in 2014. In 2015, natural gas consumption may average up to 73.39 bcf/d, which is 3% higher than the 2013 level, but may fall marginally short of the 2014 level.

The new consumption estimates are higher than the EIA’s previous month estimates.EIA projects higher natural gas consumption

Compared to 2013, higher natural gas consumption in 2015 is expected to stem from industrial sector growth and higher electric power sector usage. This will offset lower residential and commercial consumption.

Higher prices in 2014

The EIA’s latest projected Henry Hub natural gas prices average is $4.44 per million British thermal units (or MMBtu) for 2014 and $3.83 MMBtu for 2015. These are ~19% and ~3% higher, respectively, than 2013’s average price of $3.73 MMBtu.

These figures remain unchanged from the EIA’s previous month’s estimations.

What will change in 2015?

In January 2015, the EIA projects Henry Hub natural gas spot price will be more than $4.00/MMBtu. Currently, natural gas price is ~$3.66/MMBtu.

While a higher natural gas price will lead to a 0.8% decline in natural gas use in the power sector in 2014, the situation is expected to change in 2015. Power sector natural gas consumption is estimated to rise to 22.75 Bcf/d in 2015, a 1.84% increase from the 2013 level.

The EIA expects natural gas inventories to be 2,868 billion cubic feet (or bcf) at 4Q14. This is 12 bcf lower than the level in 4Q13. It’s also lower than the EIA’s previous month’s estimate. Lower inventories indicate higher demand and a price increase. The EIA expects natural gas inventories to decline and reach 1,431 bcf at the end of March 2015.

Key stocks and ETFs

A higher natural gas price will benefit US gas producers such as CONSOL Energy (CNX), Southwestern Energy Company (SWN), and Chesapeake Energy (CHK). Some of these companies are components of the SPDR S&P Oil & Gas Exploration & Production ETF (XOP) and the Energy Select Sector SPDR ETF (XLE).

Read the following section to know about energy production in the Bakken shale.

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