More frigid weather in February led to another large downward revision to the STEO's end-of-March 2014 projection for working natural gas inventories. Projected inventories now end March at 965 billion cubic feet (Bcf), ending the season below 1,000 Bcf for the first time since 2003. Much colder-than-normal temperatures in February led to large stock withdrawals in response to high demand from the residential, commercial, and electric power sectors. According to data from Bentek Energy, three of the top five months for total natural gas demand over the last eight years have occurred this heating season (December 2013, January 2014, and February 2014).
The stage is now set for a record stock build over the injection season. Projected end-of-October inventories total 3,459 Bcf, a build of almost 2,500 Bcf. This month's STEO raises the outlook for natural gas prices, which will spur additional production. Expectations for lower demand from the electric power sector compared with the past several years should help enable a record-high stock build.
U.S. Natural Gas Consumption
EIA expects total natural gas consumption will average 71.3 Bcf per day (Bcf/d) in 2014, a drop of 0.1 Bcf/d from 2013. The projected year-over-year increases in natural gas prices contribute to declines in natural gas used for electric power generation from 24.9 Bcf/d in 2012 to 22.3 Bcf/d in 2013 and 22.0 Bcf/d in 2014. In 2015, total natural gas consumption falls by 0.3 Bcf/d as a decline in residential and commercial consumption more than offsets consumption growth in the industrial and electric power sectors. EIA expects natural gas consumption in the power sector to increase to 22.6 Bcf/d in 2015 with the retirement of some coal plants.
U.S. Natural Gas Production and Trade
EIA expects natural gas marketed production will grow at an average rate of 2.5% in 2014 and 1.1% in 2015. Rapid natural gas production growth in the Marcellus formation is causing natural gas forward prices in the Northeast to fall even with or below Henry Hub prices outside of peak-demand winter months. Consequently, some drilling activity may move away from the Marcellus back to Gulf Coast plays such as the Haynesville and Barnett, where prices are closer to the Henry Hub spot price.
Liquefied natural gas (LNG) imports have declined over the past several years because higher prices in Europe and Asia are more attractive to sellers than the relatively low prices in the United States. Several companies are planning to build liquefaction capacity to export LNG from the United States. Cheniere Energy's Sabine Pass facility is planned to be the first to liquefy natural gas produced in the Lower 48 states for export. The facility has a total liquefaction capacity of 3 Bcf/d and is scheduled to come online in stages beginning in late 2015.