Natural Gas Report: Residential Consumption Brushes Off High Prices

April 4, 2014 04:32 AM


According to EIA's Natural Gas Weekly update, the contiguous United States saw a daily average of 23.5 heating degree days (HDDs, the variation of temperatures below 65 degrees Fahrenheit) this winter, 13% more than the average for both last winter and the previous five winters. Residential and commercial consumers increased their consumption to a greater degree in response to these colder temperatures than consumers in other sectors, as most of the natural gas consumed by homes and businesses directly involves space heating. This made the residential and commercial sectors less likely to curtail consumption when prices rose to more than $5.00/MMBtu on days between the end of January and the beginning of March. Residential and commercial consumption rose by 14% this winter, driving their share of total U.S. consumption to more than 50% for the first time since the 2010-11 winter season.

Prolonged periods of bitterly cold temperatures this winter also contributed to higher levels of industrial sector consumption, because large industrial facilities needed additional gas for space heating. However, since like electric generators, industrial customers more frequently purchase natural gas with spot and futures contracts whose prices fluctuate daily, this winter's 33% price increase limited industrial consumption growth, which rose by only 2%, to 21.5 Bcf/d. As a result, the industrial sector's share of total U.S. natural gas consumption decreased to 24% this winter, from 25% last winter and 26% during the 2011-12 winter season.

Similarly, increased natural gas prices limited the degree to which consumption from electric generators (power burn) rose to meet higher electric demand this winter. Although power burn grew throughout most of the United States as cold temperatures led to increased electric demand for space heating, it decreased in the Northeast and Southeast. Markets in these regions responded to higher gas prices by increasing electric generation from other power sources, such as nuclear, hydroelectric, wind, and coal, or decreasing total electric generation. As a result, power burn rose by only 1% this winter, to 19.7 Bcf/d, and its share of total U.S. natural gas consumption declined to 22% this winter versus 23% last winter and 26% during the 2011-12 winter season, EIA said.

  • Inventories stand at 822 Billion cubic feet (Bcf) -- 51.6% below year-ago and 54.7% below the five-year average.
  • This week notes a 74 Bcf net withdrawal from storage.
  • Storage draws met expectations of 74 Bcf.


May '14 natural gas opened today at $4.43 -- 8 3/4 cents below last week's Natgas Report. Bulls will target $4.57 and $4.66. Support lies at $4.22 along the way to the January low at $3.85.

The average temperature in the continental United States during the report week was 41.3°F -- that's 1.3°F above the same time last year and 5.7°F below the 30-year average temp.

Prices --

"The Nymex May contract, which became the near-month contract on Friday, opened the report week at $4.395/MMBtu last Wednesday and settled yesterday at $4.364/MMBtu. The 12-month strip (the 12 contracts between May 2014 and April 2014) fell slightly from $4.502/MMBtu last Wednesday to $4.454/MMBtu yesterday," according to EIA.

Consumption --

"Total consumption decreased 15.8% week over week, as temperatures moderated, with decreases occurring in all sectors. The largest decline was in the residential and commercial sectors, which primarily use natural gas for heating. Residential and commercial consumption declined 25.6% this week. Consumption of natural gas for power generation decreased 10.5%, and industrial consumption declined 2.5%," according to EIA.

Indicated text provided by EIA.

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