The outlook for U.S. natural gas is critically dependent on the outcome of the domestic oil rig count because gas production growth in the past four years was predominately from the big shale oil plays, according to Citigroup Inc.

Analyst Anthony Yuen reviewed the impact of the oil rig count to gas in a report for clients last week. A lot of U.S. gas production is associated gas from oil wells, which means that its level is going to rise and fall with oil’s output.

If the oil rig count remains in its slump, “the decline in associated gas production would leave the market short of gas,” Yuen said. The result would mean a tighter U.S. gas market, which “should lead to a rise in gas rig counts as early as 2016.”

Yuen and his team modeled what various rig count scenarios between now to 2017 would mean for global oil balances; what rig count scenarios are most likely; and what they could mean for domestic natural gas production using the Energy Information Administration’s latest Drilling Productivity Report, which details output from the seven big onshore basins (see Shale Daily, Sept. 15).

Five different total oil and gas rig count scenarios were constructed to project future output, including one specifically for gas:

The oil market may achieve balance, as in the global balance case, but the domestic gas market may be short, Yuen said. The global balance case incorporates 1.8 Bcf/d of additional supply from drilled but uncompleted wells, but “our results showed that U.S. gas production would fail to rise, leading to a sharply lower end-October 2016 gas inventory level. This is because gas production from key oil plays (Bakken, Eagle Ford and Permian) could fall by 1 Bcf/d year/year in 2016.”