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EIA Downgrades US Natural Gas Production Forecast for 2018

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Weekly US natural gas production

PointLogic, a market intelligence company, estimates that US dry natural gas production rose 0.3% to 80.1 Bcf per day on April 5–-11, 2018. Production also increased 11.2% or by 8.1 Bcf per day from a year ago.

Active US natural gas futures have declined ~12.1% year-to-date partly due to rising production. The United States Natural Gas ETF (UNG) and the First Trust Natural Gas ETF (FCG) have declined ~4.8% and 7.2% during the same period. UNG aims to track active natural gas futures. FCG aims to track the performance of the ISE-Revere Natural GasTM Index.

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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 production. Natural gas is usually an associated product of crude oil. As a result, higher oil prices could increase US crude oil rigs, which could increase US natural gas supplies.

US oil prices have risen ~57.7% since June 21, 2017, partly due to production cuts by major world producers. The iShares US Energy ETF (IYE) and the iShares Global Energy ETF (IXC) have risen ~14% and ~19%, respectively, since June 21, 2017. IYE targets to track an index of US equities in the energy sector. IXC targets to track an index of global equities in the energy sector.

Natural gas production estimates 

Annual US dry natural gas production has increased 48% since 2005. US production averaged 73.6 Bcf per day in 2017.

The EIA released the STEO report on April 10, 2018. The EIA estimates that US natural gas production could average ~81.08 Bcf per day in 2018, which is 0.8% lower than the March estimates. The EIA also estimates that production could average ~82.79 Bcf per day in 2019, which is 0.2% higher than the March estimates. US natural gas production’s annual average could reach a new record in 2018 and 2019.

Impact 

Record US natural gas production could weigh on natural gas prices in 2018 and 2019.

Next, we’ll discuss US natural gas consumption.

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