The EIA’s natural gas consumption forecasts
The U.S. Energy Information Administration’s (or EIA’s) February Short-Term Energy Outlook (or STEO) forecasts that total natural gas consumption will average 75.7 Bcf/d (billion cubic feet per day) in 2015 and 76.2 Bcf/d in 2016. This compares to the estimated 73.5 Bcf/d in 2014.
The increase in consumption will be a result of increased demand from industrial and electric power sectors.
The EIA forecasts that demand from the power sector will grow by 8.1% in 2015. It’s expected to grow ~1.9% in 2016.
The EIA forecasts that industrial consumption will increase by 6.6% and 2.1% in 2015 and 2016, respectively. This is due to new industrial projects coming on line, 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
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 trends for week ended March 6
US natural gas consumption fell in all sectors during the week ended March 6. Total consumption fell ~17.5% compared to the prior week. Residential and commercial consumption declined ~28.5%. Consumption for power generation fell ~4%. Industrial consumption declined ~5.3%.
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 impacted prices for the week ended March 6.
Natural gas prices affect the profit margins of gas-weighted producers such as Chesapeake Energy (CHK), Range Resources (RRC), Encana Corporation (ECA), and WPX Energy (WPX). CHK, RRC, and WPX are part of the Vanguard Energy ETF (VDE) and make up ~1.1% of the fund.