Natural Gas

Following a strong injection season, working gas in storage ended the summer refill season at an estimated 3,571 Bcf. Sustained cold weather early this year left Lower 48 working gas stocks at 857 Bcf at the end of March, the lowest level since 2003. Beginning in mid-April, weekly storage injections have exceeded the five-year average for 29 consecutive weeks because of strong domestic production growth and a mild summer (implying less demand from electric generators to meet air conditioning demand). In addition, natural gas prices declined over the summer, as strong injections and production eased concerns about supply for this winter. Based on a forecast for a close-to-normal winter, EIA projects that inventories will end the winter season on March 31 at 1,562 Bcf.

Natural Gas Consumption

EIA expects total natural gas consumption to average 73.2 Bcf/d in 2014, an increase of 2.2% from 2013, with the industrial sector leading the growth. In 2015, total projected natural gas consumption is expected to be flat 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 1.7% decline in natural gas consumption in the power sector to 22.0 Bcf/d in 2014. EIA expects natural gas consumption in the power sector to increase to 22.7 Bcf/d in 2015.

Natural Gas Production and Trade

EIA expects natural gas marketed production to grow by an annual rate of 4.8% in 2014 and 2.3% in 2015. EIA projects that the strong increases already seen in the Lower 48 states for most of this year will continue, more than offsetting the long-term declining trend in the Gulf of Mexico. As of August, the most recent month for which EIA data are available, dry natural gas production was 3.4 Bcf/d greater than it was in August 2013. Production usually declines in September; however, preliminary data indicate that growth has continued, with new production offsetting maintenance declines.

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.

Liquefied natural gas (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 market, 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 3,571 Bcf as of October 31, which was 238 Bcf lower than at the same time last year and 261 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 average throughout most of the injection season. The deficit to the five-year average and to last year's level has narrowed over the injection season with substantial weekly stock builds. Heading into next summer, EIA projects that end-of-March 2015 inventories will total 1,562 Bcf, 94 Bcf below the five-year (2010-14) average.

Natural Gas Prices

The Henry Hub natural gas spot price averaged $3.78/MMBtu in October, a decline of 14 cents from September. EIA expects spot prices to remain relatively low but to rise slightly with winter heating demand. Projected Henry Hub natural gas prices average $4.44/MMBtu in 2014 and $3.83/MMBtu in 2015.

Natural gas futures prices for February 2015 delivery (for the five-day period ending November 6) 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 February 2015 contracts at $2.76/MMBtu and $6.38/MMBtu, respectively. At this time last year, the natural gas futures contract for February 2014 averaged $3.57/MMBtu and the corresponding lower and upper limits of the 95% confidence interval were $2.70/MMBtu and $4.73/MMBtu.