Natural gas prices have started the week with a gain of over 10 percent, but the recent trends in the price have concerned some in the U.S. gas industry.
Last week, prices shed 7.17 percent, extending a streak of weekly losses that began in the middle of last December. Some have suggested prices could slump to less than $2 per million British thermal units
Over the past four weeks, natural gas prices lost some 50 percent—a substantial and sharp plunge that prompted Chesapeake’s chief executive to suggest supply growth might have to be moderated
In a recent interview with Bloomberg, Nick Dell’Osso said that “Growth in gas supply is not needed in the short term. We do think the industry should acknowledge that and may reduce growth in the near term.”
In this, Dell’Osso echoed an earlier statement by the chief executive of EQT, who said earlier this month that forecasts of a production increase this year in the U.S., to the tune of 3 billion cu ft daily, may fail to pan out.
“That’s a little ambitious with the current pullback and prices,” Toby Rice told Bloomberg in an interview. “You are going to see an operator response and slow down in the activity levels.”
Last year, demand for LNG from Europe stimulated gas production growth, but now that Europe’s storage caverns are full and winter is mild, demand is slacking off, as is domestic demand, again thanks to the mild weather.
Inflation, meanwhile, continues to be a problem for the gas industry, especially in the production growth aspect.
“Inflation has not reacted,” Rice told Bloomberg. “So, we’ve got a couple big forces that are working against producers.” In addition, the EQT executive said, there is a shortage of pipelines that further discourages substantial production growth.
“We still see pockets in the US where natural gas prices are higher than what they’re paying in Europe. It’s crazy,” Rice said.
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By Irina Slav for Oilprice.com
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