US natural gas demand
In the seven days leading up to October 21, 2015, total US natural gas consumption rose by 5% on a week-over-week basis. The increase was led by residential and commercial sector consumption of natural gas, which rose by ~30%. Industrial consumption saw a week-over-week rise of 2.3%. Power sector consumption fell by 6.7% in the same period.
Higher natural gas consumption is bullish for natural gas prices (UNG), which can in turn be promising 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).
US natural gas consumption forecasts
In its latest STEO (Short-Term Energy Outlook) released on October 6, the EIA (U.S. Energy Information Administration) forecast that total US natural gas consumption should average 76.2 Bcf (billion cubic feet) per day in 2015 and 76.4 Bcf per day in 2016, compared to an estimated 73.1 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 by 15.6% in 2015. It’s then expected to fall by 2.1% in 2016. Lower natural gas prices are expected to result in increased natural gas consumption for electricity generation in 2015.
Industrial consumption is forecast to remain flat in 2015 and increase by 4.2% 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 due to better efficiency.