The EIA’s natural gas consumption forecasts
The EIA forecasted that US natural gas consumption will increase in 2015—due to increased demand from the industrial and electric power sectors. The EIA forecasted that total natural gas consumption will average 74.3 billion cubic feet per day, or Bcf/d, in 2015 and 75.2 Bcf/d in 2016—compared to an estimated 73.3 Bcf/d in 2014.
Demand from the power sector is forecasted to average 23.5 Bcf/d in 2015. This is 0.5 Bcf/d higher than the previous month’s forecast. Then, it’s expected to grow ~2.6% to 24.1 Bcf/d in 2016.
Industrial consumption is forecasted to increase by 5.6% and 1.9% in 2015 and 2016, respectively. The increase is due to new industrial projects coming online—predominantly in the fertilizer and chemical sectors.
Demand from the residential and commercial sectors is projected to decline in 2015 and 2016.
Consumption trends this winter
Bentek Energy reported that US natural gas consumption averaged 88.4 Bcf/d since November 1. This is 3.3 Bcf/d lower than last year. Milder temperatures caused a decline in residential and commercial demand. As a result, the EIA forecasts that consumption will average 88.1 Bcf/d for the remainder of the heating season—compared to an estimated 90.9 Bcf/d during the same period in 2014.
Consumption trends last week
According to Bentek Energy, demand for natural gas in the Northeast touched 43.1 billion cubic feet, or Bcf, last Monday. This is the highest in Bentek’s records going back ten years. It exceeded the previous record, set last winter, by 1.2 Bcf.
Low temperatures in the Northeast led to the increase in demand.
Domestic consumption rose 23.1% last week. It was led by an increase in all of the sectors. It was due to severe weather sweeping into the Midwest and moving to the south and east. Residential and commercial consumption rose 36.5% week-over-week. Consumption from the power sector increased 14.5%. Industrial consumption increased 4.4%.
Production and consumption trends determine natural gas prices’ fate. Weather is the primary factor that determines consumption trends. Read Part 3 of this series to see how the weather impacted prices last week.
Natural gas prices affect the profit margins of gas-weighted producers like Southwest Energy (SWN), EOG Resources (EOG), EQT Corp. (EQT), and Cabot Oil and Gas (COG). All of these companies are part of the Energy Select Sector SPDR ETF (XLE). They account for ~7% of the ETF.