Natural Gas Consumption Up in May 29 Week, Bullish for Prices
Production Takes the Wind out of Natural Gas Prices This Week
Natural gas consumption
Last week, total US natural gas consumption increased 2.2% week-over-week. An increase in the power sector consumption more than offset the decline in the residential and commercial sectors. Power consumption increased 10.2% last week.
Weekly consumption decreased by 6.7% sequentially in the residential and commercial sectors. Industrial consumption remained flat.
Higher natural gas consumption is bullish for natural gas prices (UNG), which is positive for gas producers like Chesapeake Energy (CHK), Noble Energy (NBL), Range Resources (RRC), and Antero Resources (AR). These companies are components of the iShares U.S. Energy ETF (IYE) and make up 2.1% of the fund.
2015 EIA natural gas consumption forecasts
The EIA (U.S. Energy Information Administration) released its STEO (Short-Term Energy Outlook) on May 12. The STEO forecasts that total natural gas consumption will average 76.9 bcf/d (billion cubic feet per day) in 2015 and 76.3 bcf/d in 2016, compared to an estimated 73.5 bcf/d in 2014.
The increase in consumption in 2015 is a result of increased demand from the industrial and electric power sectors. Demand from the power sector is forecast to grow by 12.9% in 2015. It’s then expected to fall 2.2% 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 increase 4% and 2.7% in 2015 and 2016, respectively. The increases are due mainly to new industrial projects coming online, predominantly in the fertilizer and chemical sectors.
Demand from the residential and commercial sectors is projected to decline in 2015 and 2016.
The next STEO is expected on June 9.
To read Market Realist’s analysis of recent commodity prices and their effects on energy companies, check out our Energy and Power page.
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