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Natural Gas Consumption Up: Can Prices Find Support?

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Aug. 26 2015, Updated 9:08 a.m. ET

Natural gas consumption

In the week ended August 19, total US natural gas consumption increased 1.8% week-over-week. The increase was led by the residential and commercial sectors’ consumption, which increased by ~7% during that week.

The power sector’s total natural gas consumption increased by 1% that week. We’ll look at trends in electricity generation in the next part of this series. In the industrial sector, weekly consumption decreased by a slight 0.2%.

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Higher natural gas consumption is bullish for natural gas prices (UNG), which is bullish for gas producers such as Devon Energy (DVN), Southwestern Energy (SWN), Range Resources (RRC), and QEP Resources (QEP). These companies make up ~3% of the Vanguard Energy ETF (VDE). However, despite the bullish consumption number and an overall bullish inventory report, prices still ended up lower in the week ended August 14. Check out part two of this series to find out why.

Natural gas consumption forecasts for 2015 

In its latest “Short-Term Energy Outlook,” released on August 11, the EIA (U.S. Energy Information Administration) forecasts that total natural gas consumption will average 76.5 Bcf (billion cubic feet) per day in 2015 and 76.4 Bcf per day in 2016, compared to an estimated 73.5 Bcf per day in 2014.

The EIA forecast assumes that 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 13.9% in 2015. It’s then expected to fall 3.4% 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 United States, after coal. The EIA, however, forecasts that natural gas will surpass coal and become the largest source of electricity generation by 2035. In the next part of this series, we’ll take a look at recent and long-term electricity generation and consumption trends.

Industrial consumption is forecast to rise 2.3% in 2015 and 5% in 2016 as a result of new industrial projects coming online, predominantly in the fertilizer and chemical sectors. Demand from the residential and commercial sectors is projected to fall in 2015 and 2016 because of more efficient use.

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