Natural Gas Market Update: Gas Prices Remain Volatile
Natural gas stocks
The natural gas production from the US rose slightly by 0.2% for the week ending November 4, 2015—compared to the previous week. Dry gas and well-head production also rose slightly by 0.2% over the same period. However, the natural gas production in the lower 48 states rose by 4.8% to 81.8 Bcf (billion cubic feet) per day compared to last year. The rising natural gas production will continue to put pressure on natural gas prices.
Natural gas production is higher despite lower natural gas prices
Natural gas production could hit 79.1 Bcf per day in 2015 and 80.6 Bcf per day in 2016, according to the EIA’s (U.S. Energy Information Administration) October STEO (Short-Term Energy Outlook) report. The US gas production was at 74 Bcf per day in 2014. The natural gas production will increase from Marcellus Shale region as new pipelines come online. The rising production could be driven by improving productivity and lower drilling costs.
The rising production will put pressure on natural gas prices. As a result, it will impact natural gas producers like Rex Energy (REXX), Range Resources (RRC), Gulfport Energy (GPOR), and Devon Energy (DVN). They account for 4.4% of the SPDR S&P Oil & Gas Exploration & Production ETF (XOP). These stocks’ gas output mix is more than 40% of their production portfolio. ETFs like the iShares US Oil & Gas Exploration & Production ETF (IEO) and the PowerShares DB Energy ETF (DBE) are also impacted by the ups and downs in the oil and gas market.
Browse this series on Market Realist: