Production trends last week
The EIA (U.S. Energy Information Administration) reported that total natural gas supplies were flat last week compared to the previous week. Yet supplies were still 8.8% greater than in the corresponding week last year.
Total marketed production for the month of January—the most recent EIA data available—was 78 Bcf (billion cubic feet) per day. Marketed natural gas is the gas produced before associated liquids including propane and butane are extracted. The removal of these liquids leaves dry natural gas.
Although end-of-October 2014 stocks were at a five-year low headed into the 2014–2015 heating season, record natural gas production, coupled with new pipeline projects, left sufficient supply to meet winter heating demand. In the period between November 1 and March 31, natural gas production averaged 71 Bcf per day.
Forecast production trends for 2015
The EIA continues to be bullish about natural gas production in 2015. The EIA’s “Short-Term Energy Outlook,” released on April 7, projects that total marketed natural gas production will grow 5% to 78.47 Bcf in 2015 and by a further 1.9% to 79.96 Bcf in 2016. It estimates total marketed natural gas production was 74.72 Bcf in 2014.
Continued production growth has set a grim stage for natural gas prices. High production levels are bearish for natural gas prices. Weak prices hurt gas-producing companies including Range Resources (RRC), EQT (EQT), Chesapeake Energy (CHK), and QEP Resources (QEP). All of these companies are part of the iShares Global Energy ETF (IXC), making up ~1.3% of the ETF.
Natural gas inventories are governed by natural gas production and consumption trends. The next part of this series looks at whether strong consumption trends could push prices upward.