U.S. Northeast natural gas producers may be on the other side of a years-long battle with perpetual pipeline constraints and oversupply conditions. But they’re now facing new challenges to supply growth, at least in the near-term, from low crude oil and gas prices and the decline of a major downstream consumer of Appalachian gas supplies: LNG exports along the Gulf Coast. Most of the U.S. well shut-ins since the recent oil price collapse are concentrated in oil-focused shale plays, and gas volumes associated with those wells will be the hardest hit. However, a number of gas-focused Marcellus/Utica producers also have announced or escalated supply curtailments in recent weeks, as they wait for associated gas declines to buoy prices enough to support drilling. The pullback has had immediate effects on the region’s production volumes and supply-demand balance. Today, we provide an update on the latest Appalachia gas supply trends using daily gas pipeline flow data.
In recent years, U.S. production regions that focus on natural gas have taken a backseat as capital spending shifted toward crude oil-focused resource plays like the Permian, Bakken, Eagle Ford and others. Associated gas production from these oil-rich basins drove the bulk of the total gas supply growth in recent years, outpacing U.S. natural gas demand, eroding Henry Hub prompt gas futures prices, and taking even more of the air out of gas-focused drilling.
In the COVID era and with oil prices in the $30s/bbl, prospects for gas-weighted basins have turned somewhat more positive, at least for the longer term. Massive cutbacks in oil producers’ capital spending is translating to lower crude production and, with it, lower associated gas output. If production losses mount and tighten the supply-demand balance, gas prices would rise enough to incentivize producers to bring on rigs in gas-centric basins. As we discussed last month in Shelter from the Storm, this has shifted sentiment in favor of gas-weighted exploration and production companies (E&Ps), particularly in Appalachia, boosting their share prices in the past couple of months as oil production cuts materialized.
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About the song
“The Waiting Game” was written by Buzz Cason. Cason was a member of Brenda Lee’s backing band when he wrote the song and pitched it to Lee’s producer, Owen Bradley. The song appeared as the B-side of Brenda Lee’s single, “Think.” Released in March 1964, “Think” went to #25 on the Billboard Hot 100 Singles chart. “Think” would later appear as the sixth song on side two of Lee’s 13th studio album, Too Many Rivers, released in September 1965.
Brenda Lee is an American singer and chart-topping female vocalist of the 1950s and ’60s. Her career started in 1956 at the age of 12. After her second hit single, “Dynamite,” the diminutive 4-foot, 9-inch singer became known as “Little Miss Dynamite.” She has released 29 studio albums, 26 compilation albums and 72 singles, three of which were #1 hits. She is a member of the Rock and Roll Hall of Fame, the Country Music Hall of Fame and the Rockabilly Hall of Fame. Lee also has a Grammy Lifetime Achievement Award. At the age of 80, Brenda Lee is retired and lives with her husband in Nashville.
