Natural Gas Industry – 2016 Review, Dixie Riedel

In the history of the natural gas industry, 2016 will be remembered as an eventful and record setting year.

Excess natural gas at the end of 2015 and warm winter temperatures kept prices low at the start of 2016. The summer of 2016 reversed the trend as natural gas-generated electricity hit record levels and by summer’s end, expectations for a colder winter drove natural gas prices up.

Mid-continent daily index prices posted a low of $1.28/MMBtu on March 5th and a high of $3.73/MMBtu on December 17th.  US natural gas active futures hit $3.99/MMBtu on December 28, 2016. This was the highest level since December 2014.

Storage levels ended the winter withdrawal season (03/31/2016) at the highest end-of-season on record.  Storage inventory reached an all-time record high level of 4,047 Billion Cubic Feet (Bcf) for the week ending Nov 11th.  Much colder weather in December led to back-to-back weekly withdrawals greater than 200 Bcf; dropping storage levels below the five-year average for the first time all year last.

In August the active natural gas rig count fell to 81.  This is the first time in 29 years natural gas rig count fell below 100.  A year prior the active rig count was 233.  The rig count peaked at 1,606 rigs on September 12, 2008,

2016 was the first year the U.S. became an exporter of natural gas.  This came about with exports of Liquefied Natural Gas (LNG) and more cross-the-border pipelines being built to take gas into Mexico.

Looking ahead, the EIA (U.S. Energy Information Administration) estimates natural gas prices averaging $3.27 per MMBtu in 2017. Prices averaged $2.49 per MMBtu in 2016 and $2.63 per MMBtu in 2015.