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Natural Gas Production: Bearish for Natural Gas Prices in 2017?

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Jan. 16 2017, Updated 10:36 a.m. ET

Monthly US natural gas production figures

The EIA (U.S. Energy Information Administration) estimated that US-marketed natural gas production rose by 0.32 Bcf (billion cubic feet) per day to 77 Bcf per day in December 2016—compared to the previous month. Production rose 0.4% month-over-month, but fell 2.1% year-over-year. If production keeps rising, it could pressure natural (UNG) (DGAZ) (UGAZ) (FCG) (BOIL) gas prices. For more on natural gas prices, read Part 1 and Part 2 of this series.

Higher or lower natural gas prices have a positive or negative impact on natural gas producers’ earnings such as Newfield Exploration (NFX), EXCO Resources (XCO), Antero Resources (AR), and Memorial Resource Development (MRD).

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Peak and lows

Monthly US production peaked at 79.7 Bcf per day in April 2015—the highest level ever. Natural gas production hit 75.9 Bcf per day in October 2016. It was the lowest natural gas production figure since June 2014.

US natural gas production fell due to weak natural gas (UNG) (DGAZ) (UGAZ) (FCG) (BOIL) and crude oil (PXI) (USL) (IEZ) (ERY) (IYE) prices in early 2016. Read What Can Investors Expect in the Crude Oil Market in 2017? and Decoding the World Oil Supply and Demand Gap in 2017 for more on crude oil prices.

EIA’s natural gas production estimates

The EIA estimates that US-marketed natural gas production could average 79.1 Bcf per day in 2017 and 82.3 Bcf per day in 2018. US-marketed natural gas production averaged 77.4 Bcf per day in 2016 and 78.8 Bcf per day in 2015. US natural gas production fell for the first time in 2016 since 2005.

Trump and the impact of rising natural gas production

In his energy policy, Donald Trump highlighted that he would reduce regulatory restrictions on the exploration and production of natural gas and crude oil. He said that he would open more federal land for exploration and production activity. If his policies are implemented, it would increase natural gas supplies in an oversupplied natural gas market.

Natural gas production influences US natural gas inventories. For more on natural gas inventories, read Part 3 of this series. Higher production and inventories can pressure natural gas prices.

In the next part of this series, we’ll take a look at the latest updates on natural gas consumption.

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