The EIA’s natural gas consumption forecasts
The EIA forecasts that US natural gas consumption will increase in 2015 as a result of increased demand from industrial and electric power sectors. The EIA forecasts that total natural gas consumption will average 74.3 Bcf/d (billion cubic feet per day) in 2015 and 75.2 Bcf/d in 2016, compared with an estimated 73.3 Bcf/d in 2014.
Demand from the power sector is forecast to average 23.5 Bcf/d in 2015—0.5 Bcf/d higher than the previous month’s forecast. It’s then expected to grow ~2.6% to 24.1 Bcf/d in 2016.
Industrial consumption is forecast to increase by 5.6% and 1.9% in 2015 and 2016, respectively, 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 in 2016.
Consumption trends this winter
As a result of milder temperatures, which have caused a decline in residential and commercial demand, the EIA forecasts that consumption will average 88.1 Bcf/d for the remainder of the heating season versus 90.9 Bcf/d during the same period in 2014.
Consumption for power generation, however, reached record monthly levels for both January and February as a result of colder temperatures in the eastern half of the United States. Apart from weather, structural changes—which include companies adding gas-fired capacity—have also led to the increase.
Consumption trends last week
US natural gas consumption fell in all sectors during the week. They began at high levels as the week started but fell as the second half of the week saw moderate temperatures. Total consumption fell ~7.3% compared to the prior week. Residential and commercial consumption declined ~11%. Consumption for power generation fell ~4%. Finally, industrial consumption declined ~1.8%.
Production and consumption trends determine the fate of natural gas prices. Weather is the primary factor that determines consumption trends. Read Part 3 of this series to see how the weather affected prices last week.
Natural gas prices affect the profit margins of gas-weighted producers like Chesapeake Energy (CHK), Range Resources (RRC), Encana (ECA), and WPX Energy (WPX). CHK, RRC, and WPX are part of the Vanguard Energy ETF (VDE), and they make up ~1.1% of the ETF.