US Natural Gas Production Makes History: What’s Next?

US natural gas production hit a record of 73.3 Bcf (billion cubic feet) per day in February 2016. It is the highest ever natural gas production in US history. It is 2% more than January 2016 levels despite the multiyear low oil prices. Read more about the natural gas price movement in the first part of the series. Weekly natural gas supplies rose by 1.4% between March 16, 2016, and March 23, 2016. The rise in natural gas imports from Canada and LNG (liquefied natural gas) imports led to the rise in natural gas supplies for the same period.

Market surveys show natural gas production will continue to rise in 2016 and 2017 despite lower natural gas prices. Technological advancement and the mild winter have been the key drivers for the rise in natural gas supplies. The EIA also expects natural gas production to rise further in 2016 and in 2017 due to the new pipeline projects coming online in the Marcellus and Utica shale regions.

Record natural gas production could limit the upside for natural gas prices. Multiyear low natural gas negatively affects the margins of natural gas producers like Rice Energy (RICE), Cabot (COG), Ultra Petroleum (UPL), Southwestern Energy (SWN), and EQT (EQT). These companies have a natural gas production mix more than 90% of their total portfolio. They also affect natural gas producers like Newfield Exploration (NFX), Exco Resources (XCO), Memorial Resources (MRD), and Devon Energy (DVN).

ETFs like the Guggenheim S&P 500 Equal Weight Energy ETF (RYE), the PowerShares DB Energy Fund (DBE), and the PowerShares DWA Energy Momentum Portfolio (PXI) are influenced by the ups and downs in natural gas prices.

Now let’s take a closer look at natural gas consumption.