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Shale gas expected to experience sharpest 2015 fall

15/07/2015 by

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It has been reported that the United States’ natural gas output is to fall for a third month in a row after being held hostage by plummeting oil prices. This is largely because crude oil price drops forced drillers out of fields that not only produced oil but also gas.

After four years of supplying record amounts, the output of gas in America is showing signs of weakness. For the seven largest US shale basins combined, gas production is set to drop by 0.6% in August, falling to 45.1bn cubic feet a day. The figures were revealed by the US Energy Information Administration (EIA) in its latest Drilling Productivity report.

Over the past year crude oil prices have collapsed by about half, and this is now reverberating in the US shale market. Wells have been shut across the country, in states from Texas to North Dakota; as a result, these liquid-rich reservoirs have seen a decline in gas output as companies have been forced to reduce their operations. This reduction may actually halt the slide of gas prices, however, which have fallen by almost one-third during the past 12 months.

August deliveries of natural gas rose by 1.1 cents (0.4%) to reach $2.875 per million British thermal units; meanwhile, there was a 1.4% fall in crude oil, with prices dropping to $51.48 (£32.88) per barrel. The gas production for 2015 is also expected to expand at a slower pace than before; however, despite only rising by 5.7% compared with 2014’s 6.2%, output has still reached the record amount of 78.97bn cubic feet per day. The past year has also seen a rise in the amount of gas delivered to electricity generators, with a 15% increase according to El Paso-based LCI Energy Insight. As a result of the sliding prices it is expected that the power industry could cause a 13% rise in demand. With the summer hotter than normal, fuel consumption is expected to rise in parallel with air conditioner usage.

The vice-president of market research at Stamford’s Tradition Energy, Derek Salvino, stated: “Production is not showing up and that is partially because the prices are so low. We see some heat in the forecast.” If fuel demand continues to gain, prices in the shale gas industry could resurge.

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