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Natural Gas Production Drives Natural Gas Prices

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Gas production

Natural gas production from the lower 48 states of the US continued to rise week-over-week. Production from the lower 48 states was at 79.96 Bcf (billion cubic feet) as of July 14, 2015—compared to 79.32 Bcf the previous week. The weekly natural gas production rose marginally by 0.80%. Natural gas production from the lower 48 states also rose by 3% from the previous year.

The weekly dry natural gas production and wellhead production continued to rise despite mild weather estimates. Mild weather will curb the cooling demand and slow down the demand for natural gas.

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Gas demand

Interestingly, weekly gas flows to electric power plants rose by 16% to 34.69 Bcf for the week ending July 14, 2015, despite mild weather. Gas deliveries to industrial power plants also saw a weekly rise over the same period. In contrast, gas deliveries to the residential and commercial segment fell for the week ending July 14. Massive supply consensus and record inventories will continue to put downward pressure on natural gas prices.

The roller coaster ride of natural gas prices will impact upstream players like Exco Resources (XCO), Energy EXXI (EXXI), and Range Resources (RRC). They account for 4.13% of the Spider Oil and Gas ETF (XOP). These companies also have a natural gas production mix that’s more than 45% of their production portfolio.

Energy ETFs like the Energy Select Sector SPDR ETF (XLE) and XOP moved in the opposite direction of natural gas prices. They rose by 0.72% and 3%, respectively, at the close of trade yesterday.

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