US Natural Gas Consumption Estimates Are Bearish for Prices



Natural gas consumption 

Natural gas deliveries to residential and commercial segments rose on a daily and weekly basis for the week ended December 28, 2015. In contrast, gas flows to Industrials saw a week-over-week decrease of 4%. Likewise, gas deliveries to the Power sector saw a decline during the same period. Cold weather is the key catalyst for natural gas demand this winter.

The recent surge in natural gas prices is positive for ETFs such as the United States Natural Gas Fund (UNG). They also benefit US gas producers such as Exco Resources (XCO), Newfield (NFX), Southwestern Energy (SWN), Range Resources (RRC), and QEP Resources (QEP). These companies account for ~3% of the Vanguard Energy ETF (VDE). Read how weather will play a vital role in driving natural gas prices in the next part of the series.

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US natural gas consumption estimates

The EIA (U.S. Energy Information Administration) in its December STEO (Short-Term Energy Outlook) report projected that US natural gas consumption would average 76.5 Bcf (billion cubic feet) per day in 2015 and 76.7 Bcf per day in 2016. The widening supply-demand gap will continue to affect the US natural gas market negatively. To know about supply data, read the previous part of the series.

The demand would be driven by the natural gas–based power plants in 2016. In 2015, the key demand driver was the demand from electric power plants. The old coal-based plants were substituted with natural gas plants. This renewed demand also boosted the natural gas market.


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