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US Natural Gas Production Could Help Natural Gas Bears

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Dec. 22 2017, Updated 9:19 a.m. ET

Weekly US natural gas production  

According to PointLogic, US dry natural gas production rose 0.9% to 76.8 Bcf (billion cubic feet) per day on December 14–20, 2017. Production also rose by 7.7 Bcf per day or 11.1% YoY (year-over-year). The rise in US natural gas production pressured natural gas (UNG) (FCG) prices on December 21, 2017. So far, prices (UGAZ) have fallen ~27% in 2017 due to moderate weather and oversupply. Higher crude oil (DWT) prices will also add to natural gas supplies. For more details on oil and supplies, read the previous part of this series.

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Weekly US natural gas consumption  

US natural gas consumption fell by 6.9 Bcf per day or 7.5% to 84.8 Bcf per day on December 14–20, 2017, according to PointLogic. Consumption also fell by 18 Bcf per day or 17.5% YoY. The fall in consumption from the power, industrial, and residential and commercial sectors led to the fall in natural gas consumption. Any fall in consumption is bearish for natural gas (BOIL) prices.

Lower natural gas (UNG) prices have a negative impact on energy producers’ (FENY) (IYE) earnings like Cabot Oil & Gas (COG), Exco Resources (XCO), and Antero Resources (AR).

Impact  

The EIA estimated that US natural gas production could average 79.7 Bcf per day in 2018. It also estimated that US natural gas consumption will average 76.9 Bcf per day in 2018. Production would surpass consumption in 2018, which would weigh on natural gas (DGAZ) (FCG) prices. However, a rise in exports would limit the impact of oversupply. 

Next, we’ll discuss the key drivers for natural gas prices next week.

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