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Last Year's Natural Gas Production Reached All-Time High

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Increased natural gas production has played a major role in lower prices. 

Recently, the U.S. Energy Information Administration (EIA) reported that production hit an all-time record high in 2015. Last year, U.S. marketed natural gas production reached 79 billion cubic feet per day (Bcf/d) in 2015, a sharp five percent increase over 2014 despite relatively low prices.

The growth in production was predominantly driven by five states: Pennsylvania, Ohio, West Virginia, Oklahoma and North Dakota. Those states accounted for about 35 percent of the nation’s natural gas production as it declined throughout the rest of the country. 

Source: U.S. Energy Information Administration, Natural Gas Monthly

How has natural gas production impacted customers?  

For starters, it has driven down prices. High levels of production and a record supply of natural gas in storage have underpinned the move to lower commodity prices. On the demand side, a strong El Nino contributed to an exceedingly mild winter in several major consumption regions in United States, causing a drop in winter heating demand. 

Looking forward, EIA's Short-Term Energy Outlook estimates that production growth will slow to 0.9 percent this year as low natural gas prices and declining rig activity reduce production. The warm winter, associated high storage and lower forward pricing led producers to cut 2016 capital budgets and increase their operating discipline. 

Will production continue to decline by a volume that will significantly impact prices? That remains to be seen. In the past month, there has been a firming of forward prices possibly based on a combination of higher demand (mainly due to the increased use of natural gas in power generation and LNG exports) and lower supply (through reduced production and pipeline imports) that could work to balance the market from historically high seasonal storage levels.

Stay tuned to the Direct Energy Business Blog for insights on the latest natural gas trends. To learn how your business can potentially take advantage of low natural gas prices, visit our GasPortfolio page.

Posted: April 28, 2016

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