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US Natural Gas Consumption Falls: More Bad News for Prices

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Aug. 31 2015, Updated 11:07 a.m. ET

US natural gas consumption

In the week ended August 26, total US natural gas consumption decreased 5.4% week-over-week. The decrease was led by an 11% decline in power sector consumption. 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 0.8% while residential and commercial consumption saw an increase of 2.1% week-over-week.

Lower natural gas consumption is bearish for natural gas prices (UNG), which is bearish 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). The bearish consumption number was another reason why prices ended up lower on Thursday, August 27. Check out part two of this series to know more about recent price movements.

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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.

The EIA will release its next STEO on September 9.

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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