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Supply and Demand Factors Impact Natural Gas Prices

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Aug. 28 2017, Published 10:06 a.m. ET

US natural gas production 

Market intelligence company PointLogic estimates that weekly US dry natural gas production fell 0.27% to 72.8 Bcf (billion cubic feet) per day on August 17–23, 2017. However, US dry natural gas production has risen by 1.1 Bcf per day, or 1.5%, YoY (year-over-year).

The EIA (U.S. Energy Information Administration) estimates that monthly natural gas production is at a ten-month high. High natural gas production could have a negative impact on natural gas (UNG) (GASL) (BOIL) prices.

Lower natural gas prices have a negative impact on natural gas producers’ earnings like Gulfport Energy (GPOR), Southwestern Energy (SWN), and WPX Energy (WPX).

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EIA’s natural gas production estimates 

US production averaged 74.1 Bcf per day in 2015. Production fell to 72.3 Bcf per day in 2016. Production fell for the first time in 11 years in 2016.

According the EIA’s estimates, US dry natural gas production has risen to 73.5 Bcf per day in 2017. Production is expected to rise 5.2% to 77.3 Bcf per day in 2018—compared to 2017.

Weekly US natural gas consumption  

Weekly US natural gas consumption rose 3.7% to 75.2 Bcf per day on August 17–23, 2017. It also rose by 2.2 Bcf per day or 3% YoY. Changes in natural gas consumption impact natural gas (UGAZ) (DGAZ) prices.

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US natural gas consumption estimates 

US natural gas consumption averaged 75.1 Bcf per day in 2016 and 74.7 Bcf per day in 2015. The EIA estimates that consumption will average 72.6 Bcf per day in 2017. It’s expected to rise 4.4% to 75.8 Bcf per day in 2018.

Impact  

US natural gas production could surpass demand in 2017 and 2018. Excess supplies would pressure natural gas prices. However, booming exports could limit the impact of excess supply.

In the next part of this series, we’ll take a look at some natural gas price forecasts.

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