By Sumit Roy
Natural gas output dropped notably in January.
U.S. natural gas production fell for a second-straight month in January, according to an Energy Information Administration survey of producers. Output fell from 72.77 bcf/d in December to 72.1 bcf/d in January.
Production has thus fallen by more than 1.4 bcf/d from the record 73.53 bcf/d set in November. Is this evidence that the long-awaited, sustained decline in natural gas production has begun? Or are these just temporary declines due to well freeze-offs during the dead of winter?
EIA production data are delayed by three months; thus, it will be some time before a clearer picture emerges. However, in the meantime, the weekly inventory data can offer clues. As the injection season begins, traders will compare the seasonal increases in inventories this year with those of the past.
The low-demand periods of April and May are especially good times to make this comparison since weather is not much of a factor. If production has truly begun to decline, injections during the latter half of April and in May will be much lower than normal.