EIA expects U.S. natural gas consumption to continue decreasing in 2021 and 2022

EIA expects U.S. natural gas consumption to continue decreasing in ...

Source: U.S. Energy Information Administration, Short-Term Energy Outlook (STEO)

EIA’s April Short-Term Energy Outlook (STEO) forecasts decreased total U.S. natural gas consumption in 2021 and 2022 following a decline in 2020. Consumption in 2020 was 1.9 billion cubic feet per day (Bcf/d) lower than the all-time high of 85.1 Bcf/d set in 2019. Total consumption declined as a result of the economic slowdown associated with the COVID-19 pandemic and lower heating demand amid milder temperatures. Although we expect natural gas consumption to continue to fall in 2021 and 2022, changes in sector-level natural gas consumption show different trends than in 2020.

The STEO forecasts that electric power will be the only sector that will consume less natural gas in 2021 after being the only sector to increase its natural gas consumption in 2020. Natural gas prices in 2019 and 2020 were historically low, making natural gas more competitive with coal for generating electric power. However, because forecast natural gas prices will be higher and more renewable capacity will come online in 2021 and 2022, we expect more electricity generation will come from coal and renewables and less from natural gas.

Residential and commercial natural gas consumption fell by a combined 2.1 Bcf/d from 2019 to 2020 primarily because of warmer weather and responses to the COVID-19 pandemic. The warmer weather (which resulted in 9% fewer heating degree days (HDDs) in 2020 than in 2019) reduced demand for natural gas space heating. Based on forecasts by the National Oceanic and Atmospheric Administration, we expect HDDs will increase by 5% in 2021 and by 1% in 2022. We also expect residential and commercial natural gas consumption will increase in 2021 and then decrease slightly in 2022.

In the STEO forecast, industrial natural gas consumption will increase in 2021 and 2022 after decreasing by 0.6 Bcf/d in 2020. Although also affected by heating demand, industrial natural gas consumption is more affected by economic trends. As a result of a weaker economy during the COVID-19 pandemic, industrial activity in April 2020, as measured by STEO’s natural gas-weighted industrial consumption index, was at its lowest level since the 2009 financial crisis. This index reflects the growth of manufacturing subsectors and their relative importance to total natural gas consumption. We expect that the index will exceed 2019 levels on an annual basis in 2021 and 2022 as businesses resume operations. We increased the natural gas-weighted industrial consumption index in 2021 and 2022 in our forecast to reflect expectations for economic activity based on IHS Markit forecasts.

Principal contributors: Nicholas Skarzynski, Troy Cook

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You've been saying something along these lines for a while now, haven't you?

Commented on the wrong post.

That's okay.  If there is an "x" in the upper right corner of a reply box, you can click to delete a reply but it was be done in something like 15 minutes from posting.

Considering the demand destruction created by COVID, I think it's dicey to be making predictions on what happens in the near future.  I don't always agree with some of the articles I post but I think they are worth the read and to debate or disagree with.

Thanks for the article.  I'm confused by the prediction that use of coal and renewables for generation of electric power will increase as the price of NG rises.  I was under the impression coal plants were shutting down and replaced with NG.  Maybe not as fast as I thought.

Most of the retired coal generation was the oldest and least efficient of the plants.  There are still plenty of coal fired plants and in certain areas where natural gas is periodically more expensive than say the Gulf Coast hubs, fuel switching will take place.  Getting rid of all coal fired plants ASAP would be a big boon to NG.  That can't happen soon enough.

I read most of the EIA report, and didn't find it as depressing as the article posted presents.  Considering the Pandemic, I would think that things could be much worse.  And for us on the production side, the article pays only passing mention of the growing LNG export market.

I didn't find the article title significantly depressing but then again I'm a Haynesville Shale guy and was looking for a decline in production of associated gas particularly out of the Permian Basin.  Besides the still somewhat modest price of a barrel of WTI crude, major Permian operating companies have announced plans to moderate their increase in post-pandemic production.  They have sworn up and down to Wall Street and the Private Equity sector that they won't repeat the mistakes of the past when over production drove prices down to levels where is was a burden to serve debt and still generate free cash flow.  If those companies follow through on prioritizing free cash, dividends and lowering of debt, we will not see the over supply of associated gas that tends to put a lid on Haynesville/Henry Hub pricing.  A little discipline will go a long way to making both commodity prices less volatile.

To be blunt, if Biden limits or does away with new leasing on federal lands, it will absolutely help to support the price of oil and natural gas.  Some will complain about higher gas prices at the pump but we've lived through $80 barrel oil and it didn't prove to be an economic disaster.  If there is another Boom followed by a Bust, the O&G industry can forget about support from the capital markets ever again.  This is basically their last chance to get in right.


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