NatGas Production Flat-lines For 2 Years, $5 Price Needed To Grow Output

Current natural gas prices are adequate to keep output stable, but higher prices will eventually be needed.

U.S. Gross Natural Gas Production

NatGas Production

Gross natural gas production in the U.S. (lower 48 states) edged up from 73.51 to 73.62 bcf/d in June, according to the latest data from the Energy Information Administration. Output stands near record highs, but has been largely flat over the last two years.

We saw a similar flattening of production during 2008 and 2009, when the recession and financial meltdown of those years crippled the economy and natural gas prices. This time around, the economy isn’t in free fall, but prices are still depressed.

That’s because associated natural gas production—a byproduct of oil drilling—is surging. That output is insensitive to natural gas prices and has served to offset some of the price-related cutbacks in other natural gas production.

As the chart above indicates, prices in the $3 to $4 range are enough to keep production stable. But sooner or later, demand—which has been growing—will outstrip supply, necessitating higher production. That may push prices to $5/mmbtu, a level that would encourage production to grow again.

via NatGas Production Flat-lines For 2 Years, $5 Price Needed To Grow Output.

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