US natural gas consumption
In the week ended September 2, total US natural gas consumption increased 0.9% week-over-week. The increase was led by a 3% increase 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 0.4%, while residential and commercial consumption saw a decrease of 1.7% week-over-week.
Higher natural gas consumption is bullish for natural gas prices (UNG), which are 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). The bullish consumption number could be another reason why prices ended up higher on Thursday, September 2, despite a bearish headline inventory report. Check out part two of this series to know more about recent price movements.
Natural gas consumption forecasts for 2015
In its latest Short-Term Energy Outlook (or STEO) 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 better efficiency.