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Reduced Power Demand Pushes Total Natural Gas Consumption Lower

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Natural gas consumption

In the week ended July 3, total US natural gas consumption decreased by 1.8% week-over-week. Reduced demand from the power sector, partly as a result of the Independence Day holiday, drove the decline. Total power-sector consumption decreased by 4.9% in the week ended July 3. We’ll discuss trends in electricity generation in the next part of this series.

Meanwhile, in the industrial sector, weekly consumption increased by a slight 0.5%, and the residential and commercial sectors increased consumption by 2%.

Less natural gas consumption is bearish for natural gas prices (UNG), which is negative for gas producers including Chesapeake Energy (CHK), Southwestern Energy (SWN), Range Resources (RRC), and Antero Resources (AR). These companies make up 1.5% of the iShares U.S. Energy ETF (IYE).

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Natural gas consumption forecasts for 2015 

The EIA’s (U.S. Energy Information Administration) latest “Short-Term Energy Outlook,” released on July 7, forecasts that total natural gas consumption will average 76.5 Bcf per day (billion cubic feet) in 2015 and 76.4 Bcf per day in 2016, compared to an estimated 73.5 Bcf day in 2014.

The EIA forecast assumes greater consumption in 2015 will result from increased demand from the industrial and electrical power sectors. Demand from the power sector is forecast to grow by 12.9% in 2015. It’s then expected to fall by 2.7% 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 for electricity generation in the US, after coal. The EIA, however, forecasts that it 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 forecast to increase by 3.3% in 2015 and by 3.9% in 2016 as a result of 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.

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