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Why OPEC's Meeting Is Important for Natural Gas Prices

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Part 5
Why OPEC's Meeting Is Important for Natural Gas Prices PART 5 OF 7

OPEC’s Meeting Could Impact US Natural Gas Production and Prices

Weekly US natural gas production  

PointLogic estimates that weekly US dry natural gas production rose by 0.6 Bcf (billion cubic feet) per day to 74.5 Bcf per day on September 14–20, 2017. Production rose by 4.5 Bcf per day or 6.4% during the same period in 2016.

High US natural gas production pressured natural gas (UNG) (UGAZ) (GASL) prices. Prices have fallen 17.11% year-to-date. Lower natural gas prices have a negative impact on natural gas producers’ (XLE) (XOP) profitability like Rice Energy (RICE), EQT (EQT), Rex Energy (REXX), and Exco Resources (XCO).

For details on the monthly US dry natural gas production, read Why US Natural Gas Production Fell from a 10-Month High.

OPEC&#8217;s Meeting Could Impact US Natural Gas Production and Prices

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OPEC meeting 

OPEC and non-OPEC producers’ meeting will be held on September 22, 2017. The meeting will focus on whether major oil producers should consider longer and deeper production cuts.

Major oil producers agreed to cut crude oil production by 1.8 MMbpd (million barrels per day) from January 2017 to March 2018 as part of the production cut deal.

OPEC, US crude oil rig counts, and natural gas production

Natural gas is often a byproduct of crude oil. US crude oil rigs have risen by 433 or 137% from the low in May 2016. The US crude oil rig count rose due to the rise in crude oil prices in 2016.

US crude oil (USO) (UCO) prices are at a four-month high. If OPEC extends the production cut deal, it would push crude oil prices higher. Higher prices would result in higher US drilling activity. As a result, it would increase US crude oil and natural gas production.

EIA’s natural gas production estimates  

US natural gas production averaged 74.1 Bcf per day in 2015 and 72.3 Bcf per day in 2016. Production fell for the first time in 11 years in 2016.

The EIA (U.S. Energy Information Administration) estimates that US dry natural gas production will average 73.7 Bcf per day in 2017 and 78.1 Bcf per day in 2018.

Impact 

Any rise in US natural gas production could pressure natural gas (GASL) (DGAZ) prices.

In the next part of this series, we’ll discuss US natural gas consumption.

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