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The Power Sector Drove Natural Gas Consumption Lower on June 26

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Jul. 7 2015, Updated 12:05 p.m. ET

Natural gas consumption

In the week ended June 26, total US natural gas consumption decreased by 3.2% week-over-week. A decrease in power consumption in the Southeast, Northeast, and Midwest regions led the decline. These regions experienced cooler temperatures. Total power-sector consumption decreased by 5.5% in the week of June 26. We’ll discuss trends in electricity generation in the next part of this series.

Weekly consumption decreased by 0.3% sequentially in the industrial sector, while the residential and commercial sectors’ consumption decreased by 1.5%.

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Lower natural gas consumption is bearish for natural gas prices (UNG), which is negative for gas producers like Devon Energy (DVN), Noble Energy (NBL), Range Resources (RRC), and Antero Resources (AR). These stocks are components of the iShares U.S. Energy ETF (IYE), and they make up ~3% of the ETF.

2015 EIA natural gas consumption forecasts

The EIA’s (Energy Information Administration) STEO (“Short-Term Energy Outlook”) released on June 9 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 should result from 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 should result in increased natural gas consumption for electricity generation in 2015.

Natural gas is the second-largest source of electricity generation in the United States, after coal. The EIA, however, forecasts that natural gas will surpass coal and become the largest source of electricity generation by 2035. The following part of this series discusses recent and long-term electricity generation and consumption trends.

Industrial consumption is forecasted to increase by 3.6% in both 2015 and 2016, consecutively, 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.

The next STEO is expected on July 7.

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