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Natural gas price called to top $3/MMBtu as consumption seen rising into 2018

The Henry Hub natural gas spot price is forecast to climb beyond $3.00/MMBtu into 2018 driven by rising natural gas exports and domestic consumption, the U.S. Energy Information Administration said in its "Short-Term Energy Outlook" on Oct. 11.

The natural gas spot price is forecast to climb to an annual average of $3.03/MMBtu in 2017 and to $3.19/MMBtu in 2018 amid growth in natural gas consumption.

Natural gas consumption is expected to fall to 73.11 Bcf/d in 2017 from 75.10 Bcf/d in 2016, and then rise again to 76.84 Bcf/d in 2018. Steady growth in the residential, commercial and industrial sectors into 2018 and a resurgence of power-sector consumption in 2018 after a decline in 2017 drive the year-on-year total consumption gains.

Residential demand is forecast to climb from 11.87 Bcf/d in 2016 to 12 Bcf/d in 2017 and 12.77 Bcf/d in 2018. Commercial-sector demand is forecast at 8.62 Bcf/d in 2017 from 8.48 Bcf/d in 2016, and is called to climb to 8.97 Bcf/d in 2018. Industrial-sector consumption is expected to climb from 21.10 Bcf/d in 2016 to 21.28 Bcf/d in 2017 and 21.86 Bcf/d in 2018. Electric-power consumption is forecast to climb to 26.33 Bcf/d in 2018 after a decline in consumption from 27.28 Bcf/d in 2016 to 24.81 Bcf/d in 2017.

Additionally, LNG exports are forecast to climb from 0.51 Bcf/d in 2016 to 1.84 Bcf/d in 2017, and increase by 66% year on year in 2018 to 3.05 Bcf/d.

As demand rises, dry natural gas production is forecast to increase by 0.8 Bcf/d in 2017 from 72.85 Bcf/d in 2016 to 73.63 Bcf/d and jump to a record 78.49 Bcf/d in 2018.

The EIA attributes 2018 record-high production to increased takeaway capacity out of the Marcellus and Utica shales as a result of several new projects such as the Rover and Nexus Gas Transmission pipelines.

As rising natural gas production keeps pace with increasing consumption and demand for exports, particularly for LNG, the EIA projects a balanced market from the last quarter of 2017 through 2018.