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Natural Gas Plays a Vital Role in US Electricity Generation

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Natural gas consumption

The demand from electric power plants could influence natural gas prices. The cleaner and lower cost natural gas is driving the demand for natural gas. The coal powered electric plants will pave the way for new natural gas powered electric power plants. The old power plants will retire. They will be substituted using natural gas power plants. The gas deliveries to electric power plants rose by 17% from the previous year.

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Consumption estimates

The EIA (U.S. Energy Information Administration) will release the STEO (Short-Term Energy Outlook) report on August 11, 2015. The last report estimated that the natural gas consumption might average around 76.5 Bcf (billion cubic feet) per day in 2015 and 76.4 Bcf per day in 2016. The demand would be driven from the industrial and electrical power sectors. The EIA also estimates that natural gas would be the largest contributor of electricity generation in the long term. The recent estimates suggest that coal is the largest contributor of US electricity generation. It’s followed by natural gas.

The roller coaster ride of natural gas prices affects upstream players like Chesapeake Energy (CHK), Cimarex Energy (XEC), and Antero Resources (AR). These companies account for 3.41% of the Spider Oil and Gas ETF (XOP). These companies’ natural gas production mix is more than 43% of their total production.

They also impact oil and gas ETFs like the Energy Select Sector SPDR ETF (XLE) and the SPDR Oil and Gas ETF (XOP). These ETFs also followed the direction of natural gas prices. They rose in yesterday’s trade.

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