Natural gas consumption
The latest figures suggest that power plants consume around 33% of natural gas. Lower natural gas prices are leading to a switch from coal-based plants to natural gas power plants. The old power plants are also being substituted for new low-cost and clean-fueled natural gas power plants. This renewed demand for natural gas should boost natural gas consumption in 2015. The data is also supported by the EIA (U.S. Energy Information Administration) estimates showing that natural gas consumption from electric power plants will outpace demand from residential, commercial, and industrial segments.
Gas flows to the residential and commercial segments saw daily and weekly increases for the week ending September 2, 2015. Likewise, gas deliveries to electric power plants rose weekly over the same period. In contrast, the industrial demand for natural gas fell for the week ending September 2, 2015.
The EIA (U.S. Energy Information Administration) estimates that natural gas demand could average around 76.5 Bcf (billion cubic feet) per day in 2015 and 2016—compared to 73.5 Bcf per day in 2014. The EIA also added that natural gas production might rise by 4 Bcf per day to 78.52 Bcf per day in 2015 and by 1.8 Bcf per day to 80.52 Bcf per day in 2016, respectively. Increasing supplies and slowing demand should continue to pressure natural gas prices.
The volatility in natural gas prices affects natural gas producers like QEP Resources (QEP), Antero Resources (AR), and Chesapeake Energy (CHK). Combined, they account for 2.51% of the SPDR Oil and Gas ETF (XOP). These companies’ natural gas production mixes are more than 50% of their production portfolio.
Oil and gas ETFs like the Energy Select Sector SPDR ETF (XLE) and the SPDR Oil and Gas ETF XOP are also affected by the roller coaster ride of natural gas prices.