How Does Production Data Drive Natural Gas Prices?
Will Natural Gas Inventory Data Put Pressure on Natural Gas Prices?
Natural gas output
The EIA (U.S. Energy Information Administration) estimates that natural gas production might rise by 4 Bcf (billion cubic feet) per day to 78.52 Bcf per day in 2015. The production could rise by 1.8 Bcf per day to 80.52 Bcf per day in 2016, respectively.
Natural gas consumption
The EIA estimates that the total US natural gas consumption could average around 76.5 Bcf per day in 2015 and 2016—compared to 73.5 Bcf per day in 2014. The estimates suggest that the supply and demand gap could widen in 2016.
The long-term oversupply concerns and estimates of rising production will continue to put pressure on natural gas prices. However, the demand from electric power plants could support natural gas in 2015. Gas deliveries to electric power plants will play a vital role in supporting natural gas prices. The estimates of warmer weather could also benefit natural gas prices. However, a weather-related natural gas spike is short term in nature.
The volatility in natural gas prices affects US crude oil and natural gas producers like QEP Resources (QEP), Noble Energy (NBL), and Chesapeake Energy (CHK). These companies have a natural gas production mix that’s greater than 50% of their total production. These stocks account for 2.64% of the SPDR Oil and Gas ETF (XOP).
The roller coaster ride of natural gas prices also impacts energy ETFs like the Energy Select Sector SPDR ETF (XLE) and the SPDR Oil and Gas ETF XOP. These ETFs followed the price direction of natural gas prices and rose in yesterday’s trade.
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