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Are Hedge Funds Turning Bullish or Bearish on Natural Gas?

PART:
1 2 3 4 5 6
Part 5
Are Hedge Funds Turning Bullish or Bearish on Natural Gas? PART 5 OF 6

OPEC’s Meeting Could Help Natural Gas Bears

Weekly US natural gas production  

Market intelligence company PointLogic estimates that US dry natural gas production rose by 0.1 Bcf (billion cubic feet) per day or 0.1% to 75.5 Bcf per day on November 2–8, 2017. Production has risen by 5.4 Bcf per day or 7.7% from the same period in 2016. High natural gas production could have a negative impact on natural gas (GASL) (FCG) prices.

NYMEX natural (DGAZ) (UNG) gas prices have fallen ~13% year-to-date partially due to high US natural gas production. Lower gas prices have a negative impact on energy producers (FXN) (FENY) like Exco Resources (XCO), EOG Resources (EOG), and WPX Energy (WPX).

OPEC&#8217;s Meeting Could Help Natural Gas Bears

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Weekly US natural gas consumption 

US natural gas consumption rose by 1.2 Bcf or 1.8% per day to 65.9 Bcf per day on November 2–8, 2017. Consumption has risen by 6.6 Bcf per day or 11.1% from the same period in 2016. Any rise in consumption is bullish for natural gas (BOIL) (UNG) (UGAZ) prices. 

OPEC’s meeting  

OPEC’s biannual meeting is scheduled for November 30, 2017. NYMEX crude oil (UWT) (DWT) prices have risen more than 30% since the lows in June 2017—partially due to current production cuts. For more updates, read How OPEC Meeting Could Affect Crude Oil Market. Higher crude oil prices could drive US natural gas production, as we discussed in the previous part.

EIA’s US production and consumption forecasts

The EIA estimates that US gas production will average 73.4 Bcf per day and 78.9 Bcf per day in 2017 and 2018, respectively. It also estimates that US gas consumption will average 73 Bcf per day in 2017 and 76.8 Bcf per day in 2018.

Impact  

US natural gas supplies could surpass the demand in 2017 and 2018 due to excess supplies, which could pressure natural gas (DGAZ) (UNG) prices. However, a rise in exports could offset some of the impact of oversupply. 

In the next part, we’ll discuss some natural gas price forecasts.

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