A 63% spike in U.S. natural gas futures prices over the past three weeks was enough to push some drillers to start pulling more fuel out of the ground, according to energy analysts and data from financial firm LSEG.
To be sure, gas production was still down around 8% so far this year after several energy firms, including EQT and Chesapeake Energy, delayed well completions and cut back on other drilling activities after prices fell to 3-1/2-year lows in February and March.
But, now that some drillers have stopped curtailing output and started boosting production again, gas futures prices have eased about 2% so far this week. Those prices have fallen despite an ongoing heat wave in Texas expected to boost power demand in the state to a record high for the month of May for a second time this week.
“The expectations for strong demand this summer for cooling and increased LNG (liquefied natural gas) exports have caused a reconsideration among producers, resulting in an increase in output,” said John Kilduff, a partner at Again Capital LLC in New York.
“It doesn’t take much for producers to regain their confidence and increase output,” Kilduff said.
LSEG said gas output in the Lower 48 U.S. states had fallen to an average of 97.5 billion cubic feet per day (bcfd) so far in May, down from 98.2 bcfd in April. That compares with a monthly record of 105.5 bcfd in December 2023.
On a daily basis, however, output was up about 1.5 bcfd since hitting a 15-week low of 96.2 bcfd on May 1.
One billion cubic feet is enough gas to supply about 5 million U.S. homes for a day.
“Gas production is showing signs of life, as Appalachian supply bounces to a two-month high on indications that EQT has returned a portion of curtailed volumes amid the recent price rally,” analysts at consultancy EBW Analytics Group said in a note.
Officials at EQT, Chesapeake and other major U.S. gas producers were not immediately available for comment.
EQT is the biggest U.S. gas producer and Chesapeake is on track to become the biggest producer after its merger with Southwestern Energy.
SUPPLY, DEMAND AND NEW DRILLING
With prices down earlier this year, U.S. drillers cut the number of gas rigs operating to just 102 at the start of May, the lowest since December 2021, according to a report from energy service firm Baker Hughes.
Over the past two weeks, however, that count has edged up to 103 gas rigs operating.
Output cuts earlier this year caused the U.S. Energy Information Administration (EIA) to project that U.S. gas production will decline in 2024 even as domestic demand and LNG exports were on track to rise to record highs.
(Reporting by Scott DiSavino; editing by Jonathan Oatis)
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