US Natural Gas Production Is near a 2-Year Low



Monthly US natural gas production

The EIA (U.S. Energy Information Administration) estimates that monthly US dry natural gas production fell by 2.37 Bcf (billion cubic feet) per day, or 3.2%, to 71.6 Bcf per day in April 2017—compared to March 2017. US dry natural gas production fell 1.8% from the same period in 2016.

The fall in production has a positive impact on natural gas (DGAZ) (GASL) (UNG) prices. Higher natural gas prices have a positive impact on natural gas producers’ profitability like Southwestern Energy (SWN), EQT (EQT), Newfield Exploration (NFX), and Rex Energy (REXX).

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Peaks and lows

Monthly US dry natural gas production hit 76.8 Bcf per day in July 2015—the highest level ever. Production rose due to higher crude oil and natural gas prices between 2012 and 2014. Cheaper credit facilities also promoted drilling activities during this period. Technological advancement and drilling efficiency added to the drilling activity.

In contrast, production hit 67.3 Bcf per day in February 2017—the lowest level since February 2015. Production fell due to weak natural gas and crude oil (USO) (UCO) (XLE) prices in early 2016.

EIA’s natural gas production estimates

On July 11, 2017, the EIA released its monthly Short-Term Energy Outlook. It estimates that US dry natural gas production will average 73.3 Bcf per day in 2017—the same as previous estimates.

US dry natural gas production will average 76.42 Bcf per day in 2018—0.2% lower than previous estimates.

US dry natural gas 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

President Trump’s energy policies could drive natural gas production. The rise in US natural gas production would weigh on natural gas prices. So, energy investors should add integrated oil majors like Chevron (CVX) and ExxonMobil (XOM) to their portfolio. The integrated business model makes companies less prone to lower energy 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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