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EIA: Consumption will drive natural gas prices up

Natural gas prices are expected to rise, according to the EIA’s latest Short-Term Energy Outlook report.

The average natural gas spot price at the benchmark Henry Hub for December 2015 was $1.93 per million British thermal units. That’s the lowest monthly average since March 1999.

In the January report, the Nymex futures strip averaged $2.50/MMBtu for 2016 and $2.80/MMBtu for 2017. The Nymex futures strip represents the price of natural gas for delivery at each contract month.

The expected price increases reflect consumption growth, mainly from the industrial sector, that outpaces near-term production growth.

In September 2015, total marketed production of natural gas hit a record high of 80.2 billion cubic feet per day, according to data from the EIA’s survey of natural gas production. The EIA estimates growth will slow 0.7 percent in 2016, then increase 1.8 percent in 2017 as natural gas prices rise and more demand comes from the industrial sector and liquefied natural gas exporters.

Total natural gas consumption is also expected to increase. U.S. consumers used an estimated 75.7 Bcf/d of natural gas in 2015. Forecasted natural gas consumption averages 76.6 Bcf/d in 2016 and 77.2 Bcf/d in 2017. The forecasts are increases of 1.5 and 0.8 percent, respectively.

The report also predicts natural gas consumption in the residential and commercial sectors to increase over the next two years, reflecting higher heating demand.

By mid-2017, the EIA expects the United States to be a net exporter of natural gas for the first time since 1955. A sharp increase of natural gas exports by pipeline to Mexico drive the export forecast. Cheniere’s Sabine Pass LNG liquefaction plant enters service this year after a slight delay. Exports from Sabine Pass will begin late February or early March.

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