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 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.

Consumption rose to 24.133 Tcf in 2010 from 22.840 Tcf the previous year, EIA estimated, led by a 7% rise in power generation demand to 7.378 Tcf from 6.873 Tcf. Industrial demand was up slightly to 7.932 Tcf from 7.442 Tcf in 2009. Residential and commercial demand was up 3% to 8.158 Tcf in 2010.

The agency pegged total dry gas production at 21.577 Tcf in 2010, up 1 Tcf from 20.580 Tcf in the previous year. Marketed production also was up about 1 Tcf, to 22.569 Tcf in 2010, up from 21.604 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 popular “Where the Market is Going and What Can You Do About It?” seminar Dec. 7-9 in Chicago. Visit https://seminar.intelligencepress.com/Hedging2011/ for more information.

Gross withdrawals from oil, natural gas, coalbed and shale gas wells totaled 26.858 Tcf, according to preliminary EIA findings, up from 26.013 Tcf in 2009. Of that total, 4.350 Tcf was from shale gas, up from 3.384 Tcf in 2009 for a 29% increase. The 2009 shale total was up 48% from 2.284 in 2008, the first year EIA broke out shale gas numbers.

Of the gross withdrawals total, in addition to the shale gas, 14.760 Tcf was gas well gas, 5.782 Tcf was associated gas, and 1.967 Tcf was coalbed methane (CBM). Gas well gas and associated gas decreased just slightly, while CBM held even with the previous year.

Net imports were down slightly to 2.601 Tcf in 2010, representing 10.8% of U.S. consumption from 2.679 the year before. As recently as 2007 imports made up 16% of U.S. natural gas consumption.

At 21.577 Tcf, 2010 dry gas production came close to the 21.731 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 showed U.S. energy production of 58.527 quadrillion Btus (quads) from fossil fuels, up from 56.644 quads in 2009. Renewable energy at 8.064 quads continued to gain on production of nuclear power, which was 8.441 quads in 2010. Total U.S. energy production was 75.031 quads, up from 72,603 quads in 2009. U.S. consumption rose to 98.003 quads from 94.475 in 2009.

The last two years showed the effects of the economic crash and recession. From 2004 through 2008 U.S. consumption had ranged right around 100 quads, hitting 101.36 quads in 2007.

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