Drivers of natural gas production
Higher crude oil prices and improving natural gas pipeline capacity in the United States have led to a rise in natural gas production. Natural gas is often an associated product of crude oil produced in US shale formations.
Active Brent and WTI crude oil futures have risen ~63% and ~54%, respectively, since June 21, 2017, partly due to supply cuts by major oil producers. The two-day OPEC meeting began on June 22, at 4.00 AM EST. On June 21, the Saudi Arabian energy minister said major oil producers need to increase output by 1,000,000 bpd. A significnat increase in crude oil production from major oil producers could pressure oil prices.
As a result, lower oil prices could decrease the number of active US crude oil rigs, which could decrease oil and natural gas production. Lower natural gas supplies could support natural gas prices.
Weekly US natural gas production
Market intelligence company PointLogic estimates that US dry natural gas production increased 0.5% to 80.1 Bcf (billion cubic feet) per day from June 14 to 20. Production also increased 11.9% or by 8.5 Bcf per day from a year ago.
Active US natural gas futures nearly hit a 13-month high on January 29. Since then, prices are down ~18%, partly due to increased production and mild weather. The United States Natural Gas ETF (UNG) fell ~10.2% 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 of companies mainly involved in natural gas exploration and production. FCG fell 3.9% since January 29. Natural gas–weighed stocks Cabot Oil & Gas (COG), Gulfport Energy (GPOR), and EQT (EQT) fell 10.5%, 5.6%, and 1.5%, respectively, since January 29.
Natural gas production estimates
Annual US dry natural gas production increased 48% since 2005. US natural gas production averaged 73.6 Bcf per day in 2017. The EIA estimates that US natural gas output could average ~81.20 Bcf per day in 2018 and ~83.78 Bcf per day in 2019. Annual US natural gas production’s average could hit a new record in 2018 and 2019 if these projections are achieved.
Record US natural gas production could weigh on natural gas prices.
Next in this series, we’ll cover US natural gas consumption.
US natural gas futures increased 0.33% to $2.97 per MMBtu (million British thermal units) from June 14 to 21. The United States Natural Gas ETF (UNG) rose 0.3%.
Verizon Communications stock (VZ) closed down 2.09% on Tuesday after the leading US mobile carrier reported mixed results for the first quarter of 2019 before the market bell yesterday.
Several European auto companies want Nokia’s (NOK) patent business subjected to an antitrust probe.
The first-quarter semiconductor earnings season has begun, and the stock market is showing bullish sentiment as investors buy ahead of earnings releases.
Netflix (NFLX) is working its way through a series of price increases in several markets, including the United States and parts of Europe.
Netflix (NFLX) is aiming to add 14.6 million paying subscribers in the first six months of 2019.
Earlier today, the second-largest US automaker, Ford Motor Company (F), announced a plan to invest $500 million in Plymouth-based automotive company Rivian.