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Analyzing the US Natural Gas Production Trend

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Nov. 20 2020, Updated 5:12 p.m. ET

Weekly US natural gas production  

PointLogic, a market intelligence company, estimates that US dry natural gas production increased 0.6% to 80.1 Bcf (billion cubic feet) per day on April 19–25. The production has increased 12.5% or by 8.9 Bcf per day from a year ago.

US natural gas futures have decreased ~7.7% YTD (year-to-date) partly due to increased production. The United States Natural Gas ETF (UNG) has declined 1.2% YTD. UNG aims to follow active US natural gas futures. The Energy Select Sector SPDR ETF (XLE) has increased ~3.2% YTD. XLE aims to track the performance of the Energy Select Sector Index. Anadarko Petroleum (APC) and Marathon Petroleum (MPC) account for ~5.3% of XLE’s holdings. The stocks have risen more than 25% YTD. Anadarko Petroleum and Marathon Petroleum are the top percentage gainers in XLE’s holdings YTD.

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Drivers of natural gas production 

Higher crude oil prices and the natural gas pipeline capacity have been driving the rise in natural gas supplies. Natural gas is often an associated product of crude oil produced in US shale formations. As a result, higher oil prices could increase US crude oil rigs, which could increase US natural gas production and crude oil production.

WTI oil prices have risen ~60.3% since June 21, 2017, partly due to production cuts by major oil producers. The iShares US Energy ETF (IYE) and the Vanguard Energy ETF (VDE) have increased ~20% and ~21%, respectively, since June 21, 2017. IYE aims to track an index of US equities in the energy sector. VDE aims to follow the performance of an index of energy stocks.

Natural gas production estimates 

Annual US dry natural gas production has risen 48% since 2005. US production averaged 73.6 Bcf per day in 2017. According to the EIA, US natural gas production could average ~81.08 Bcf per day in 2018. Annual US natural gas production’s average could reach a new record in 2018.

Impact 

Record US natural gas production could weigh on natural gas prices in 2018.

Next, we’ll discuss US natural gas consumption.

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