Natural gas production in 2014 is expected to witness continued growth and the pace of growth will accelerate compared with last year, according to Barclays.This week the Energy Information Administration (EIA) reported that January Lower-48 natural gas production growth was significantly above expectations. January gross withdrawals in the Lower-48 increased 0.35 Bcf/d, to 75.29 Bcf/d, in January 2014, according to the latest EIA Monthly Natural Gas Gross Production Report.

The reported production growth was significantly greater than pipeline flow estimates, which had showed production falling almost 0.7 Bcf/d m/m in January. Pipeline flow estimates have poor visibility into the intrastate flows in several states, most notably in Texas. With historical revisions, for 2013 as a whole, Lower-48 gross withdrawals grew 1.79 Bcf/d y/y, on average. The y/y growth looks much higher than that of the previous month’s report (+1.1 Bcf/d) for 2013, as the EIA has revised the 2012 historical data lower.

Meanwhile, warmer trending weather have put pressure on prices at the front of the curve.

The prompt contract fell by nine cents, $4.45/MMBtu, on the week. The back of the curve suffered smaller losses, with calendar 2015 losing four cents and calendar 2016 shaving off three cents w/w. Storage levels dropped, 74 Bcf last week, 2 Bcf below the expected withdrawal of 76 Bcf.

The producing region drew 24 Bcf, while the East drew 46 Bcf. In the West, inventories dropped 4 Bcf. This left only 822 Bcf in the ground as of March 28. The storage deficit to last year, however, narrowed 16 Bcf, to 973 Bcf, while the shortfall to the five-year average widened 67 Bcf, to 1,000 Bcf, for the week in reference. Although storage levels are trending towards 800 Bcf at the end of March, the lowest level since 2003, the market remains confident that the storage deficit can be narrowed significantly over the course of the injection season.
Source: Barclays