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 ~0.2% in the seven days leading up to October 14, 2015, compared to the seven days that ended on October 7. Supply levels remained ~2.3% greater than they were in the corresponding week last year.
Total marketed production for July, according to the latest monthly data from the EIA, was at ~79.5 Bcf (billion cubic feet) per day. This is almost the same as marketed production in June 2015, which was 79.4 Bcf per day. In July 2014, production was at ~75.6 Bcf 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.
US natural gas production forecasts
The EIA remained bullish about natural gas supplies in 2015. In its STEO (Short-Term Energy Outlook) report released on October 6, 2015, it projected that total US marketed natural gas production would grow by as much as 5.6% over 2014, to 79.1 Bcf per day in 2015, and by 1.9% more, to 80.6 Bcf per day, in 2016. The report pegged total marketed natural gas production at 74.9 Bcf per day in 2014.
However, continued production growth may pressure natural gas prices (UNG) further downward 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), because it means more volume to transport. Having said that, if prices continue to fall, 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 deeper look at natural gas consumption trends.