As with oil, U.S. natural gas production jumped after combining horizontal drilling techniques with hydraulic fracturing. And as you and I both know, the surge in output led glut in supply, which in turn caused the price of both crude oil and natural gas drop precipitously.
But this isn’t all-around bad news for investors!
Natural gas production in the U.S. is up by 5% year over year, according to the Energy Information Administration (EIA). Their latest monthly report estimates that average output is expected to rise 4.2 billion cubic feet per day this year.
This means producers are still producing, and are able to stay profitable in low-prices.
And demand is looking to grow with this supply. The EIA estimates U.S. natural gas consumption to rise to 76.7 bcf per day this year, a growth of 4.3% year-over-year, based mostly on the power and industrial markets. These higher rates of usage are driven by low prices; the less it costs, the more they’ll use, which will raise the price again in the long-term.
However, this demand growth isn’t necessarily enough to use up all of our extra supply.
Luckily, storage is an option. So far this season, average natural gas injection has been higher than the 5-year average by 32%, meaning that storage companies – and eventually those in position to export natural gas – are heating up.
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