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What Could Impact Natural Gas Futures?

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Weekly US natural gas production 

PointLogic estimates that US dry natural gas production rose by 0.9 Bcf (billion cubic feet) per day to 75.5 Bcf per day on October 26–November 1, 2017. Production rose 1.2% week-over-week and by 4.7 Bcf per day or 6.6% YoY (year-over-year). Any rise in US natural gas production is bearish for natural gas (UNG) (BOIL) prices.

EIA’s US natural gas production  

On October 31, 2017, the EIA (U.S. Energy Information Administration) reported that US dry natural gas production fell by 0.05 Bcf per day to 75.9 Bcf per day in August 2017—compared to July 2017. Production fell 0.1% month-over-month but rose by 1.1 Bcf per day or 1.6% YoY. US natural gas production was near an 18-month high.

US natural (UGAZ) (GASL) gas prices have fallen ~18% year-to-date partially due to high natural gas production. Lower gas prices will have a negative impact on natural gas producers (XLE) (XOP) like Rex Energy (REXX), ConocoPhillips (COP), Cabot Oil & Gas (COG), and Antero Resources (AR).

EIA’s estimates 

US natural gas production will average 73.6 Bcf per day in 2017 and 78.5 Bcf per day in 2018, according to the EIA. US production averaged 72.9 Bcf per day in 2016, which was the first fall in 11 years.  

OPEC’s meeting 

OPEC’s meeting will be held on November 30, 2017. OPEC, Saudi Arabia, Russia, Iraq, and Kuwait signaled extending the current production cuts nine more months. Major producers might officially announce the production cut extension at OPEC’s meeting. US crude oil (DBO) (UWT) prices have risen ~30% since the lows in June 2017—partially due to the due to the current production cuts.

Impact 

High US natural gas production could pressure natural gas (DGAZ) (FCG) prices. Higher crude oil prices due to OPEC’s production cuts could drive US natural gas production. As a result, US natural gas production could be the biggest bearish catalyst for natural gas prices in 2018.

In the next part, we’ll discuss US natural gas consumption.

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