EIA’s monthly drilling report
The EIA (U.S. Energy Information Administration) released its monthly drilling report on September 14, 2015. The government data showed that the natural gas production could fall by 208 Mcf (million cubic feet) per day to 44,785 Mcf per day in October 2015—compared to September 2015. The natural gas production will fall substantially in the Eagle Ford, Marcellus, and Niobrara shale regions of the US. The consensus of slowing natural gas production could support natural gas prices.
Supply and demand
In contrast, in its September STEO (Short-Term Energy Outlook) report, the EIA stated that natural gas production could rise by 4 Bcf (billion cubic feet) per day to 78.52 Bcf per day in 2015 and by 1.8 Bcf per day to 80.52 Bcf per day in 2016, respectively. The rise in the natural gas production is driven by drilling efficiency despite long-term lower natural gas prices.
The EIA’s monthly drilling report and STEO report suggest that the natural gas production might slow down in the short term. However, over the long term, the natural gas production will outpace demand. It could negatively influence natural gas prices. In the short term, slowing production and warm weather could benefit natural gas prices.
As a result, natural gas prices rose for the fourth day in a row. The rise in natural gas prices improves natural gas producers’ profitability like EQT (EQT), Gulfport Resources (GPOR), and Range Resources (RRC). They account for 3.32% of the SPDR Oil and Gas ETF (XOP). These companies’ natural gas production mix is more than 40% of their production portfolio. Energy ETFs like XOP and the Energy Select Sector SPDR ETF (XLE) also benefit from rising natural gas prices.