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EIA: Domestic Gas a Rising Tide, Up 1 Tcf in 2010, NGI Reports.

DULLES, Va. -- Domestic natural gas production, bolstered by shale plays, continued a five-year upward trend, increasing by nearly 5% in 2010 over the level in 2009, almost matching a nearly 6% hike in demand. Gas production was bolstered by a nearly 30% jump in shale play output, according to statistics published Wednesday in the Energy Information Administration's (EIA) Annual Energy Review for 2010.

Continuing a steady upward trend, U.S. natural gas production has risen by 20% over the last five years, from 18.051 Tcf in 2005, Natural Gas Intelligence (NGI) reported.

Consumption rose to 24.13 trillion cubic feet (Tcf) in 2010 from 22.84 Tcf the previous year, EIA estimated, led by a 7% rise in power generation demand to 7.38 Tcf from 6.87 Tcf. Industrial demand was up slightly to 7.93 Tcf from 7.44 Tcf in 2009. Residential and commercial demand was up 3% to 8.16 Tcf in 2010.

The agency pegged total dry gas production at 21.58 Tcf in 2010, up 1 Tcf from 20.58 Tcf in the previous year. Marketed production also was up about 1 Tcf, to 22.57 Tcf in 2010, up from 21.60 Tcf in 2009.

Increased supplies of natural gas have depressed natural gas prices in recent months into the $3-4/MMBtu range. Even in a market with depressed prices, INTL Hencorp Futures LLC broker Tom Saal said it is important to use all of the trading tools that are available to protect against market swings.

"If you're hedging against price spikes as an end-user, call options are an inexpensive way to do it," said Saal. "Even with implied volatility running between 30-40%, which is pretty low on a historical basis, it is important to hedge. With 34% implied volatility, that means prices could be 34% higher or lower than where they are right now, but obviously the upside is the concern here. A 34% run-up in prices is still certainly worth hedging against."

Giving tips and teaching people how to use market tools to their advantage in today's current market, Saal will join his colleague Ed Kennedy in hosting their heralded "Where the Market is Going and What Can You Do About It?" seminar Dec. 7-9 in Chicago. Visit http://seminar.intelligencepress.com/hedging2011/ for more information.

Gross natural gas withdrawals from oil, natural gas, coalbed and shale gas wells totaled 26.86 Tcf, according to preliminary EIA findings, up from 26.01 Tcf in 2009. Of that total, 4.35 Tcf was from shale gas wells, up from 3.38 Tcf in 2009 for a 29% increase. The 2009 shale total was up 48% from 2.28 in 2008, the first year EIA broke out shale gas numbers.

Net imports were down slightly to 2.60 Tcf in 2010, representing 10.8% of U.S. consumption, from 2.679 and 11.7% the year before. As recently as 2007 imports made up 16% of U.S. natural gas consumption.

At 21.58 Tcf, 2010 dry gas production came close to the 21.73 Tcf produced in 1973, the top producing year for natural gas.

EIA's preliminary figures show U.S. crude oil production up just slightly to 5.512 million b/d in 2010 from 5.361 million b/d.

The agency's annual review for 2010 pegged U.S. energy production of 58.52 quadrillion Btus (quads) from fossil fuels, up from 56.64 quads in 2009. Renewable energy at 8.06 quads continued to gain on production of nuclear power, which was 8.44 quads in 2010. Total U.S. energy production was 75.03 quads, up from 72.60 quads in 2009. U.S. consumption, including imports, rose to 98 quads from 94.48 in 2009.

While consumption rose in 2010, it did not reach pre-recession heights. From 2004 through 2008 U.S. consumption had ranged right around 100 quads, hitting 101.36 quads in 2007.

About the Natural Gas Futures Price Seminar

Saal and Kennedy will be taking time off from active natural gas futures trading, in a repeat of the very popular Natural Gas Futures Hedging Seminar, at the JW Marriott Chicago, Dec. 7-9, 2011.

For more information visit http://seminar.intelligencepress.com/hedging2011/.
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Date:Oct 20, 2011
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