US natural gas production
Based on data from Bentek Energy, an energy market analytics company, the EIA (U.S. Energy Information Administration) reported that total US natural gas production fell ~0.4% in the week ended September 9 compared to the week ended September 2. However, supply levels remain ~4% greater than they were in the corresponding week last year.
Total marketed production for June, the latest monthly data the EIA has provided, was ~79.2 Bcf (billion cubic feet) per day. In comparison, marketed production in May 2015 was 78.5 Bcf per day. It was ~74.2 Bcf per day in June 2014. 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.
Forecast production trends for 2015
The EIA remains bullish about natural gas supply in 2015. The EIA’s September STEO (Short-Term Energy Outlook) report released on September 9 projects that total marketed natural gas production will grow 5.7% over 2014 to 78.95 Bcf per day in 2015, and by 2.2% more to 80.68 Bcf per day in 2016. The report pegs total marketed natural gas production at 74.72 Bcf per day in 2014.
Continued production growth may pressure natural gas prices (UNG) if demand doesn’t match this supply. Weak prices would hurt gas-producing companies such as Noble Energy (NBL), Range Resources (RRC), and Antero Resources (AR). These companies make up ~2% of the Vanguard Energy ETF (VDE).
Higher production, however, could benefit MLPs such as MarkWest Energy Partners (MWE), as it means more volume to transport. Having said that, if prices fall continuously, producers may respond by cutting production in the longer term. This could be negative for some MLPs.
Natural gas inventories and prices are governed by both natural gas production and consumption trends. In the next part of this series, we’ll take a look at natural gas consumption trends.