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US Natural Gas Production, Consumption Should Be Strong in 2016

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May. 19 2016, Updated 2:07 a.m. ET

EIA’s natural gas production forecasts

The EIA (U.S. Energy Information Administration) released its STEO (Short-Term Energy Outlook) report on May 10, 2016. The government agency forecast that US natural gas production could average ~79.6 Bcf (billion cubic feet) per day and ~81.3 Bcf per day in 2016 and 2017, respectively.

In its April STEO report, the EIA forecast that US natural gas production would average ~80.0 Bcf (billion cubic feet) per day and ~81.4 Bcf per day in 2016 and 2017, respectively. US natural gas production averaged 78.9 Bcf in 2015.

Advancements in drilling techniques and improved productivity drove the rise in natural gas production despite lower natural gas prices. Associated production and booming crude oil production were also major reasons for the rise in natural gas production in 2014 and 2015.

For more on US crude oil production, please read US Crude Oil Production Fell for 15th Straight Week: What’s Next? The coming online of new pipelines in the Marcellus and Utica shale regions in 2016 and 2017 could also support the rise in natural gas production.

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US natural gas consumption 

The EIA added that US natural gas consumption could average 76.5 Bcf (billion cubic feet) per day and 77.4 Bcf per day in 2016 and 2017, respectively, in its May STEO report. These estimates were almost the same as April’s STEO report estimates.

Demand is expected to be driven by the industrial sector in 2017. New projects’ coming online in the fertilizer and chemical sectors could also drive demand.

Limited upside

The rise in natural gas production could limit the potential upside for natural gas prices, adding to natural gas inventories. For more on natural gas inventories, please read the second part of this series.

Multiyear low natural gas prices impact upstream players such as Newfield Exploration (NFX), Gulfport Energy (GPOR), Ultra Petroleum (UPL), and Memorial Resource Development (MRD).

The volatility in oil and gas prices also affects funds such as the Guggenheim S&P 500 Equal Weight Energy ETF (RYE) and the PowerShares DWA Energy Momentum ETF (PXI).

Read the next part of the series for the latest natural gas price forecast.

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