Weekly natural gas supplies
PointLogic reported that natural gas supplies fell by 1.1% to 79.3 Bcf (billion cubic feet) per day for the week ending June 29, 2016, compared to the previous week. Supply levels are 0.62% less than they were for the same week in 2015. Natural gas imports from Canada fell to 6.5 Bcf per day from 6.9 Bcf per day for the week ending June 29, 2016, compared to the previous week. Imports from Canada were at 6 Bcf per day for the same period in 2015. The slowing natural gas supplies support natural gas prices. For more on prices, read part one of this series.
EIA’s latest monthly natural gas production figures
The EIA (U.S. Energy Information Administration) reported that the US produced 79.1 Bcf per day of natural gas in March 2016. US natural gas production peaked at 80.1 Bcf per day in February 2016. The decline in natural gas production in March 2016 was due to the decline in production in Texas and the Marcellus Shale regions. Production also fell due to lower natural gas prices.
EIA’s natural gas production forecast
The EIA estimates that US natural gas production could average ~79.6 Bcf per day in 2016 and ~81.3 Bcf per day in 2017. Production will rise due to the production increase in US shale regions in 2016 and 2017. The rise in demand from Mexico will also lead to the rise in natural gas production.
The advancement in technology and improved drilling methods led to a rise in productivity. As a result, natural gas production rose despite lower natural gas prices. Associated production and the rise in US crude oil production in 2014 and 2015 also led to the rise in natural gas production. For more on US crude oil production, read US Crude Oil Production Hits Lowest Level since September 2014. Natural gas production is expected to rise very slightly for the rest of 2016 due to lower natural gas prices and fewer rigs. For more on rig counts, read part three of this series.
Impact of natural gas production
The rise in natural gas production will add to US natural gas inventories. For more on US natural gas inventories, read part two of this series. High natural gas production will limit the upside potential for natural gas prices.
The rises and falls in oil and gas prices affect ETFs such as the Direxion Daily Natural Gas Related Bull 3x Shares ETF (GASL), the First Trust ISE-Revere Natural Gas ETF (FCG), and the PowerShares DWA Energy Momentum Portfolio (PXI).
Read the next part of this series for the latest update on natural gas consumption.