Natural Gas Projections for Winter
Westmnster, MD
12/05/2016 09:36 AM

Residential and commercial natural gas use peaks during the winter, as these consumers use natural gas primarily for space heating. During winter months, natural gas delivered to the residential and commercial sectors accounted for more than 50% of all natural gas delivered for end uses in the United States. The seasonal effect in the residential sector is about twice as great as in the commercial sector.

Natural gas is also used to fuel water heaters, cook stoves, dryers, and other equipment in the residential sector. The commercial sector has the same uses, as well as natural gas space cooling and combined heat and power applications. These uses generally make up most of the natural gas consumption for these sectors in warmer months.

To balance seasonal swings in use, natural gas is placed in storage. Natural gas inventories have risen consistently during the storage injection season that typically runs from April through the end of October. The Energy Information Administration (EIA) projects inventories will total 3,956 billions of cubic feet (Bcf) at the end of October, which would be a record high going into the heating season. Strong storage injections this summer reflect high summer production and expanded storage capacity. If early fall heating demand is low, it is possible that inventories could top 4,000 Bcf during November. Under the base case winter forecast, EIA expects inventories to end the winter at 1,892 Bcf. Even in the event of another cold winter, EIA does not expect stocks to fall below 1,000 Bcf by the end of this heating season.

The average commercial business could expect a 10% decrease in natural gas expenditures this winter compared with last winter given EIA's base case for temperatures. EIA forecasts a 6% decline in commercial natural gas consumption this winter as temperatures are expected to be warmer than last winter. Additionally, commercial prices for natural gas this winter are forecast to be 4% lower than last winter. Although EIA forecasts Henry Hub spot prices this winter will average 13% less than last winter, changes in spot prices do not quickly translate into lower delivered prices. The rates utilities charge for delivered natural gas can be set by state utility commissions a year or more in advance and reflect the cost of gas purchased over many months. Also, prices include a fixed component to cover utility operating costs and the cost to transport the natural gas.

Under a 10% colder scenario, EIA projects natural gas consumption to be 1% higher than last year, but expenditures would still be 4% lower than last year. Under a 10% warmer scenario, EIA expects declines of 14% in consumption and 17% in expenditures compared with last year.

Information compiled from:

Joe Tabeling
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