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Natural Gas Supply Fell on June 26 but Was Higher Than Last Year

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Natural gas production 

The EIA (Energy Information Administration) reported that total natural gas supply decreased by 0.3% in the week ended June 26, compared to the previous week, according to data from Bentek Energy. However, it remained 5.4% greater than the corresponding week last year.

Total marketed production for April, the latest month the EIA has reported on, was ~79.4 bcf/d (billion cubic feet per day). Marketed natural gas is the gas produced before associated liquids like propane and butane are extracted. The removal of these liquids leaves dry natural gas.

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Forecast production trends for 2015

The Energy Information Administration remains bullish about natural gas production in 2015. The EIA’s June “Short-Term Energy Outlook” (or STEO), released on June 9, projects that total marketed natural gas production will grow 5.7% over 2014, to 78.96 bcf/d (billion cubic feet per day) in 2015, and by a further 2% to 80.56 bcf/d in 2016. The EIA pegs total marketed natural gas production at 74.72 bcf/d for 2014.

Continued production growth may pressure natural gas prices (UNG) if demand doesn’t meet this supply. Weak prices will hurt gas-producing companies like Devon Energy (DVN), Noble Energy (NBL), Range Resources (RRC), and Antero Resources (AR). These stocks are components of the iShares U.S. Energy ETF (IYE). They make up ~3% of the ETF. Higher production, however, benefits master limited partnerships such as Energy Transfer Partners (ETP), as it means more volumes for transportation. Having said that, if prices fall incessantly, producers might respond by cutting back on production. This could be negative for some MLPs too.

The next STEO is expected on July 7.

Natural gas inventories are governed by natural gas production and consumption trends. The next part of this series analyzes natural gas consumption trends.

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