US natural gas consumption
Market intelligence company PointLogic reported that US natural gas consumption fell by 1.3% from August 4–10, 2016. Gas consumption fell for the third time in the last ten weeks. This is a key bearish driver for natural gas prices. Lower natural gas prices have a negative impact on oil and gas producers’ profitability like Cimarex Energy (XEC) and Newfield Exploration (NFX).
Gas deliveries to the power sector fell by 0.8% week-over-week, but rose by 7.3% YoY (year-over-year). To learn about what drives the power sector’s natural gas consumption, read Part 1 in this series.
Gas flows to the residential and commercial segment fell week-over-week and YoY. Gas deliveries to the industrial sector fell week-over-week, but they rose by 0.5% YoY.
Gas exports to Mexico fell by 2.6% week-over-week, but they rose by 12.1% YoY. US natural gas consumption is up by 4.3%—compared to the same period in 2015.
US natural gas consumption estimates
The EIA (U.S. Energy Information Administration) released its monthly STEO (Short-Term Energy Outlook) report on August 9, 2016. It estimated that US natural gas consumption could average ~76.3 Bcf (billion cubic feet) per day in 2016 and ~77.2 Bcf per day in 2017.
In its July STEO report, the EIA estimated that US natural gas consumption could average ~76.5 Bcf (billion cubic feet) per day in 2016 and ~77.7 Bcf per day in 2017. US natural gas consumption averaged ~75.3 Bcf per day in 2015.
The marginal downward revision in natural gas consumption in 2016 and 2017 is negative for natural gas prices. However, overall US natural gas consumption is expected to be higher in 2016 and 2017 compared to 2015.
The rise in demand from the electric power sector could drive the demand for natural gas in 2016. However, the power sector demand could fall in 2017 due to higher natural gas prices. However, demand from the industrial and residential segments could drive demand for natural gas in 2017.
High demand should benefit natural gas prices. High natural gas prices have a positive impact on oil and gas producers’ profitability like Cimarex Energy (XEC), Newfield Exploration (NFX), and Kosmos Energy (KOS). Check out the last part of this series for a discussion on natural gas price forecasts.
Volatility in oil and gas prices can impact funds such as the United States Natural Gas ETF (UNG), the Direxion Daily Natural Gas Related Bull 3X Shares ETF (GASL), and the PowerShares DWA Energy Momentum ETF (PXI).
In the next part of this series, we’ll take a look at the U.S. Commodity Futures Trading Commission’s “Commitment of Traders” report.