North American natural gas demand growth is shaping up to be modest this year and again in 2016, as speculators wait for industrial projects to be completed and exports to become reality, Raymond James & Associates Inc. analysts said Monday.

Investors are well aware that actual gas demand growth has lagged supply growth considerably for several years, in turn pushing aside some demand-side projects, noted analysts J. Marshall Adkins, Pavel Molchanov and J.R. Weston.

"However, as more projects materialize in 2017 and 2018, we project a total of 6 Bcf/d in incremental demand over the 2014-2019 timeframe," which is "not bad, but not a super bull market either." Alone, however, that amount "is certainly not enough to rebalance the oversupplied domestic gas market."

The disappointment in demand growth isn't limited to one industrial sector, said the Raymond James trio, but in all of the "key categories" of incremental gas demand: fertilizer, ethylene, methanol and gas-to-liquids (GTL). Growth is well below expectations, with some projects now delayed and others canceled. Among other things, large GTL projects, costing many years to build and billions to finance, are being dropped in favor of smaller complexes.

Whether the anemic demand growth changes anytime soon is questionable. The Raymond James team is cautious about a longer term forecast because industrial gas demand growth can't by itself "fix" the structural glut in domestic gas. Once liquefied natural gas exports begin, exports also increase to Mexico and coal-to-gas switching makes a dent, there may be a more balanced picture.

"In total, between 2014 and 2019 (beyond which visibility is minimal), we project that industrial gas demand will grow from 20.6 Bcf/d to 26.5 Bcf/d," said Adkins and his colleagues. "While this is a robust 29% industrial demand growth over five years, or about 5% on an annualized basis, it represents less demand growth over five years than we have seen U.S. supply grow in just the last year."

In addition, industrial demand growth is back-end loaded, with limited growth this year and next, followed by a substantial growth spurt in 2017 and 2018 of about 3.7 Bcf/d total. That rate would be better than the industrial demand increase from 2008 to 2014, which was 15% and from a smaller base, the analysts noted.

"Just in 2014 alone, U.S. gas supply rose by 5 Bcf/d. Over the past six months, the annual supply growth has been closer to 7 Bcf/d. That means an extra 6 Bcf/d of demand over the next five years is clearly not all that earth-shattering by comparison. Furthermore, nearly all of the industrial gas demand growth is predicated on long-lead-time, capital-intensive construction projects, which are subject to frequent (indeed, virtually endemic) delays and cost overruns."

Stronger natural gas prices might help the supply/demand picture, but prices don't look to strengthen this year, according to two other analysts.

Barclays Capital's Michael Cohen said Henry Hub prices likely would "continue their downward drift this quarter, averaging $2.45/Mcf, as soon as maintenance and expansions are completed."

BNP Paribas analyst Teri Viswanath, who directs natural gas commodity strategy, also said in a note Monday there's "more downside risk to prices ahead."

In the past seven years, "surplus production has forced the November contract to align with the summer futures strip" from April through October. "Indeed, we note that the November futures contract typically expires weaker than the October contract. Yet, so far the November 2015 has remained seasonally buffered from the reset in the front of the curve, trading at a 20 cent premium to the June 2015 futures contract.

"Accordingly, given our expectation of prolonged price weakness, this particular contract appears vulnerable to a correction as the market recognizes the further need for demand-side balancing."