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Oil Ticks Higher on Inventory Draw

Oil Ticks Higher on Inventory Draw

Crude oil prices moved higher…

U.S. Drillers Scale Back Operations as Gas Prices Tumble

U.S. natural gas producers are beginning to reduce drilling and investment as low prices weigh on their returns.

Reuters reports that natural gas prices in the U.S. hit the lowest in three and a half year, betraying drillers’ expectations for a rebound this year after last year’s price depression due to ample supply.

As a result, they are no longer waiting for prices to improve but are curbing output, as expressed in their financial report presentations.

Reuters cited Comstock Resources’ presentation as including an intention to reduce active drilling rigs from seven to five. Not only this, but the company will also suspend dividend payments until natural gas prices rise enough to generate money for it.

Another gas heavyweight, Antero Resources, was cited in the Reuters report as planning to cut its drilling budget by over a quarter and cut a rig from its three-rig lineup. Antero Resources also said it had reduced the number of its completion crews from two to one.

Natural gas prices in the United States have been stubbornly low in the past year or so on the back of strong supply, not least from the oil fields of the shale patch where natural gas is extracted as a byproduct of crude oil.

But even in the gas plays drillers have been giving it their all with an eye to expanding LNG exports as local demand remains relatively flat. Then President Biden paused new LNG export terminal approvals. Among the motives for the move, the White House cited the prospect of higher gas prices at home.

That, and the coming end of peak demand season as the weather begins to warm, pushed natural gas prices below $2 per million British thermal units earlier this month. This week, the House passed a bill aimed at reversing President Biden’s pause on new LNG capacity but it has yet to go through the Senate and it might die there, leaving the prospects of gas demand unchanged.

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By Irina Slav for Oilprice.com

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