Possible Change in US Natural Gas Production Trends

According to PointLogic, US dry natural gas production decreased 0.1% to 78 Bcf (billion cubic feet) per day on February 15–21, 2018. However, production increased 10.6% or by 7.5 Bcf per day from a year ago.

US natural gas prices dropped ~9% in the last 24 months—partly due to oversupply. The United States Natural Gas ETF (UNG) and the VelocityShares 3x Long Natural Gas (UGAZ) dropped 15% and 77%, respectively, during this period. These funds follow natural gas futures.

Higher crude oil prices and the increasing natural gas pipeline capacity have been driving the rise in natural gas production. US crude oil and natural gas prices have increased 17% and 0.3% in the last 12 months.

The United States Oil ETF (USO) and the ProShares Ultra Bloomberg Crude Oil ETF (UCO) increased ~11% and 18% in the last 12 months. These ETFs track crude oil futures.

Annual US natural gas production has risen 48% since 2005. Production averaged 73.57 Bcf per day in 2017. US natural gas production could average ~80.30 Bcf per day and ~82.86 Bcf per day in 2018 and 2019, respectively, according to the EIA. US natural gas production’s annual average could hit a new record in 2018 and 2019.

Record US natural gas production would be the biggest threat to natural gas prices in 2018.

Next, we’ll discuss US natural gas consumption.