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US Natural Gas Production Hit a 2-Year Low

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Monthly US natural gas production  

The EIA (U.S. Energy Information Administration) estimates that monthly US dry natural gas production fell by 5.8 Bcf (billion cubic feet) per day to 67.3 Bcf per day in February 2017—compared to the previous month. Production fell 7.9% month-over-month and 6.7% year-over-year. It’s the lowest production level since February 2015.

The fall in production is bullish for natural gas (UNG) (BOIL) (UGAZ) prices. Higher natural gas prices have a positive impact on natural gas producers’ earnings like Gulfport Energy (GPOR), Southwestern Energy (SWN), Antero Resources (AR), and Cabot Oil & Gas (COG). For more on natural gas prices, read Part 1 and Part 2 of this series.

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Peaks and lows  

The EIA estimates that monthly US dry natural gas production peaked at 76.8 Bcf per day in July 2015—the highest level ever. On the other hand, production hit 71.5 Bcf per day in June 2016—the lowest natural gas output figure since June 2014.

Production fell due to weak natural gas and crude oil (XLE) (XOP) (IEZ) prices in early 2016. For more on US natural gas drilling activity, read the previous part of this series.

EIA’s natural gas production estimates  

The EIA released its monthly STEO (Short-Term Energy Outlook) report on May 9, 2017. It estimates that US dry natural gas production will average 74.1 Bcf per day and 77.3 Bcf per day in 2017 and 2018, respectively. The estimates are 1.3% and 0.3% higher than previous estimates.

Production averaged 74.1 Bcf per day and 72.3 Bcf per day in 2015 and 2016, respectively. In 2016, production fell for the first time since 2005.

Impact of rising natural gas production  

Natural gas is an associated product of crude oil. The rise in US crude oil production in 2017 will also lead to a rise in US natural gas supplies in 2017.

Successful implementation of President Trump’s proposed energy policies could also increase US oil and gas production. The rise in production in 2017 is the biggest bearish catalyst for natural gas prices.

Natural gas production influences US natural gas inventories. For more on natural gas inventories, read Part 3 of this series.

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

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