Natural Gas Consumption Up in June 12 Week: Bullish for Prices



Natural gas consumption

Last week, total US natural gas consumption increased by 3.4% week-over-week. An increase in the power sector consumption more than offset the decline in the industrial sector. Power sector consumption increased by 8.2% last week.

Weekly consumption decreased by 1.9% sequentially in the industrial sector. Residential and commercial sectors consumptions remained mostly flat.

Higher natural gas consumption is bullish for natural gas prices (UNG), which is positive for gas producers like Chesapeake Energy (CHK), Noble Energy (NBL), Range Resources (RRC), and Antero Resources (AR). All these companies are components of the iShares U.S. Energy ETF (IYE) and make up 2.1% of the fund.

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2015 EIA natural gas consumption forecasts

The EIA (U.S. Energy Information Administration) released its STEO (Short-Term Energy Outlook) on June 9. The EIA forecasts that total natural gas consumption will average 76.7 bcf/d (billion cubic feet per day) in 2015 and 76.6 bcf/d in 2016, compared to an estimated 73.5 bcf/d in 2014.

The increase in consumption in 2015 will be a result of increased demand from the industrial and electric power sectors. Demand from the power sector is forecast to grow by 13.7% in 2015. It’s then expected to fall 2.6% in 2016. Lower natural gas prices are expected to result in increased natural gas consumption for electricity generation in 2015.

Natural gas is the second-largest source of power or electricity generation in the United States, after coal. But the EIA forecasts that natural gas will surpass coal and become the largest source of electricity generation by 2035.

The EIA forecasts industrial consumption to increase by 3.6% in both 2015 and 2016. The increase is 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 2016.


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