Natural gas is where it’s at when it comes to our industry.
In fact, the U.S. Energy Information Administration (or EIA) has projected that the production and consumption of natural gas will increase substantially over the next decade.
But the increase is not just projected for the future: The increase is ALREADY HERE!
Check this out: Natural gas production increased 1.5% in March to 72.7 billion cubic feet per day (bcf/d).
In addition, natural gas production increased following improvement in the weather conditions, as the colder-than-normal winter hampered production.
But it didn’t stop there: New natural gas rigs also became operational in Texas and the Appalachian and Uinta basins, which led to the rise in production.
The EIA estimates the continental U.S. marketed production would increase by 0.7 bcf/d and 0.4 bcf/d in 2014 and 2015, respectively, from 2013.
In 2013, average natural gas production was 70.2 bcf/d.
The EIA expects that the Marcellus formation, which is largely driving increases in overall production, would be boosted by new infrastructure projects.
So what does this mean?
In simple terms it means that a variety of new projects like ANR Pipeline’s Lebanon Lateral and the Texas Eastern Transmission projects, which started production in the past few months, will lead the growth.
In a nutshell what all of this boils down to is: Natural gas inventory figures are important indicators because inventory data can signal supply and demand trends.
If the increase in natural gas inventories is more than expected, it implies either greater supply or weaker demand and is bearish for natural gas prices.
If the increase in natural gas inventories is less than expected, it implies either weaker supply or greater demand and is bullish for natural gas prices.