Consumption trends last week
Last week, total US natural gas consumption decreased by 3.8% week-over-week. As temperatures turned milder, consumption declined in residential and commercial sectors by 13% compared to last week. Industrial consumption declined by 1.3%. Consumption for power generation increased by 3.9%, likely indicating cooling demand.
Low natural gas consumption is bearish for natural gas prices. This hurts gas-weighted producers including Chesapeake Energy (CHK), ECA (ECA), Cabot Oil & Gas (COG), and EOG Resources (EOG). All of these companies are part of the iShares Global Energy ETF (IXC), making up 3% of the ETF.
The EIA’s natural gas consumption forecasts for 2015
The U.S. Energy Information Administration’s “Short-Term Energy Outlook,” released on April 7, forecasts that total natural gas consumption will average 76.3 Bcf per day (billion cubic feet) in 2015 and 75.8 Bcf per day in 2016, compared to an estimated 73.5 Bcf per day in 2014.
Greater consumption should result from increased demand within the industrial and electric power sectors. This would be positive for the companies mentioned above. Demand from the power sector is forecast to grow by 11.5% in 2015. It’s then expected to fall by 2.2% in 2016.
Industrial consumption is forecast to increase by 4.9% and 2.5% in 2015 and 2016, respectively, due to new industrial projects coming online, predominantly in the fertilizer and chemical sectors.
Demand from residential and commercial sectors is projected to decline in 2015 and in 2016.
For Market Realist analysis of recent commodity prices and their effects on energy companies, check out our Energy and Power page.