Natural Gas

Natural Gas Consumption

EIA expects that total natural gas consumption to average 72.5 Bcf/d in 2014, an increase of 1.6% from 2013, with the industrial sector leading the growth. In 2015, total natural gas consumption will increase 0.3%, as continued industrial sector growth and higher electric power sector consumption offset lower residential and commercial consumption. Higher natural gas prices this year contribute to a 2.3% decline in natural gas consumption in the power sector to 21.8 Bcf/d in 2014. EIA expects natural gas consumption in the power sector to increase to 22.6 Bcf/d in 2015.

Natural Gas Production and Trade

EIA expects natural gas marketed production to grow by an annual rate of 5.4% in 2014 and 2.0% in 2015. STEO projects that the strong increases already seen in the Lower 48 states this year will continue, offsetting declines in the Gulf of Mexico. As of July, the most recent month for which EIA data are available, marketed production was 4.2 Bcf/d greater than it was in July 2013.

Growing domestic production is expected to continue to put downward pressure on natural gas imports from Canada and spur exports to Mexico. Exports to Mexico, particularly from the Eagle Ford Shale in South Texas, are expected to increase because of growing demand from Mexico's electric power sector and flat Mexican production.

LNG imports have fallen over the past four years because higher prices in Europe and Asia are more attractive to sellers than the relatively low prices in the United States. LNG exports are still a very small part of the total picture, however, and overall the United States will remain a net importer of natural gas because of pipeline imports from Canada.

Natural Gas Inventories

Natural gas working inventories totaled 3,100 Bcf as of September 26, which was 373 Bcf lower than at the same time last year and 399 Bcf lower than the previous five-year (2009-13) average. The injection season began somewhat slowly in April, but has continued at a strong pace, with injections above the five-year (2009-13) average throughout most of the injection season. EIA expects working gas stocks will reach 3,532 Bcf at the end of October, 283 Bcf lower than at the same time last year. Heading into next summer, EIA projects end-of-March 2015 inventories will be 122 Bcf below the five-year (2010-14) average.

Natural Gas Prices

The Henry Hub natural gas spot price averaged $3.92/MMBtu in September, a slight increase from August. EIA expects spot prices to remain below $4.00/MMBtu through November, before rising with winter heating demand. Projected Henry Hub natural gas prices average $4.45/MMBtu in 2014 and $3.84/MMBtu in 2015.

Natural gas futures prices for January 2015 delivery (for the five-day period ending October 2) averaged $4.19/MMBtu. Current options and futures prices imply that market participants place the lower and upper bounds for the 95% confidence interval for December 2014 contracts at $2.96/MMBtu and $5.94/MMBtu, respectively. At this time last year, the natural gas futures contract for January 2014 averaged $3.83/MMBtu and the corresponding lower and upper limits of the 95% confidence interval were $2.91/MMBtu and $5.04/MMBtu.