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US Natural Gas Production Hits Record High

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Monthly US natural gas production 

On February 28, 2018, the EIA (U.S. Energy Information Administration) released its monthly natural gas production data. It reported that US dry natural gas production rose 4.5% to a record high of 80.9 Bcf per day between November and December 2017. Production rose 7.3 Bcf (10%) per day year-over-year.

US natural gas prices have fallen ~30% since December 28, 2016, partly due to a growing supply. Natural gas prices hit a two-year high on December 28, 2016. The Vanguard Energy ETF (VDE) and the Energy Select Sector SPDR ETF (XLE) have fallen ~13% and 12%, respectively, since December 28, 2016. These funds have exposure to upstream energy companies.

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Drivers of natural gas production

Higher crude oil prices and natural gas pipeline capacity have been driving the rise in natural gas production. US crude oil prices have risen ~43% since June 21, 2017, partly due to supply cuts. The iShares US Energy ETF (IYE) and the iShares Global Energy ETF (IXC) have risen ~6% and ~11%, respectively, since June 21, 2017. These funds have exposure to upstream energy companies.

Natural gas production estimates 

Annual US natural gas production has risen 48% since 2005. Production averaged 73.6 Bcf per day in 2017. According to the EIA, US natural gas production could average ~80.3 Bcf per day and ~82.9 Bcf per day in 2018 and 2019, respectively. US natural gas production’s annual average could hit record highs in 2018 and 2019.

Impact

High US natural gas production could be bearish for natural gas prices in 2018. Next, we’ll cover US natural gas consumption.

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