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EIA Upgrades US Natural Gas Production Forecasts for 2018, 2019

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Weekly US natural gas production 

Pointlogic, a market intelligence company, estimates that US dry natural gas production increased 0.3% to 79.8 Bcf (billion cubic feet) per day from June 7 to June 13. Production also increased 10.4%, or by 7.5 Bcf per day year-over-year.

US natural gas futures hit nearly a 13-month high on January 29. Since then, prices have fallen ~18.3% partly due to increased production and mild weather.

The United States Natural Gas ETF (UNG) has fallen ~10.6% since January 29. UNG seeks to track active natural gas futures. The First Trust Natural Gas ETF (FCG) aims to track the performance of an index made up mainly of companies involved in natural gas exploration and production. FCG has fallen 3.8% since January 29. Natural gas–weighted stocks Cabot Oil & Gas (COG), Gulfport Energy (GPOR), and EQT (EQT) have fallen 13%, 9%, and 1.1%, respectively, since January 29.

Natural gas production estimates 

Annual US dry natural gas production has increased 48% since 2005. US natural gas production averaged 73.6 Bcf per day in 2017. The EIA (U.S. Energy Information Administration) released its Short-Term Energy Outlook Report on June 12. The report estimates that US natural gas output could average ~81.2 Bcf per day in 2018, 0.9% higher than its May estimate. The EIA also estimates that US natural gas output will average ~83.8 Bcf per day in 2019, 0.5% higher than its May estimate. The annual US natural gas production average could hit new records in 2018 and 2019 if these projections are achieved.

Drivers of natural gas production 

Active WTI oil prices have risen ~57.3% since June 21, 2017, partly due to supply cuts by major oil producers. Expectations of new sanctions on Venezuela and Iran, strong demand, and supply outages could also support oil prices.

Higher crude oil prices and improving natural gas pipeline capacity in the United States have led to a rise in natural gas output. Natural gas is often an associated product of the crude oil that’s produced in US shale formations. Higher oil prices could increase the number of active US crude oil rigs, which could increase oil and natural gas production. Higher natural gas supplies could weigh on natural gas prices.

Impact

Record US natural gas production could pressure natural gas prices in 2018.

Next, we’ll cover US natural gas consumption.

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