Weekly natural gas supplies
Market intelligence company PointLogic reported that US natural gas supplies rose by 0.8% to 80.2 Bcf (billion cubic feet) per day from August 11–17, 2016. This is a key bearish driver for natural gas prices.
Gas imports from Canada rose by 2.9% to 6.9 Bcf per day from August 11–17, 2016. Imports from Canada were at 6.1 Bcf per day during the corresponding week in 2015. The rise in imports from Canada and the rise in natural gas production contributed to the rise in US natural gas supplies.
Monthly natural gas production figures
The EIA (U.S. Energy Information Administration) reported that US natural gas production averaged 78.9 Bcf per day in July 2016. US natural gas production peaked at 80.1 Bcf per day in February 2016. Since then, it has fallen due to lower natural gas prices.
EIA’s natural gas production estimates
The EIA estimates that US-marketed natural gas production could average 79.3 Bcf per day in 2016 and 81.6 Bcf per day in 2017. US-marketed natural gas production averaged 78.8 Bcf per day in 2015.
Production is expected to rise slightly in 4Q16 and 2017 due to increased production in US shale regions. Increasing demand from Mexico due to a rise in electric power demand will contribute to the rise in natural gas production in late 2016 and 2017.
Associated production with rising US crude oil production in 2014 and 2015 also led to the rise in natural gas production. Read US Crude Oil Production Rose for the Week Ending August 12 for more on US crude oil production. Advanced technologies and improvement in drilling techniques also caused a rise in productivity. As a result, natural gas production rose despite lower natural gas prices.
Impact of natural gas production
A rise in natural gas production will add to US natural gas inventories and limit the upside for natural gas prices. For more on natural gas inventories, read part three of this series. Lower natural gas prices will have a negative impact on the earnings of oil and gas exploration and production companies such as Antero Resources (AR), Exco Resources (XCO), and WPX Energy (WPX).
The roller coaster ride in oil and gas prices affects funds such as the VelocityShares 3x Inverse Natural Gas ETN (DGAZ), the Direxion Daily Natural Gas Related Bull 3X Shares ETF (GASL), and the First Trust ISE-Revere Natural Gas ETF (FCG).
Please read the next part of this series for the latest update on natural gas consumption.