The Wall Street Journal - Natural-Gas Producers Hard Hit by Tanking Prices

October 8, 2019 – The Wall Street Journal

Natural-Gas Producers Hard Hit by Tanking Prices

Supply glut drives down price, creates existential dilemma for gas-field companies

By Sarah Troy

It is going to take a heck of a winter to ease the pain for natural-gas investors and producers.

Dragged down by a supply glut, U.S. natural-gas futures recently suffered their longest losing streak since at least 1990, according to Dow Jones Market Data. The front-month gas futures contract fell 12 consecutive trading sessions through Oct. 2, a period in which it declined around 16%. Prices are down 30% from their levels a year ago. […]

[…] “It is going to take a cold winter and more exports to keep natural-gas prices out of the cellar,” said Rusty Braziel, chief executive of RBN Energy LLC.

Natural-gas futures for November delivery lost 0.7% to settle at $2.288 per million British thermal units Tuesday.

Besides hoping for frigid temperatures to boost demand for the heating fuel, gas producers can also help themselves by dialing back drilling plans and curtailing output. That has created an existential dilemma for companies that rely on gas sales, such as those that drill in Appalachia, the country’s most prolific gas field. If they slow output, they risk ceding market share to rivals in other parts of the country for whom natural gas is a byproduct of oil drilling. But if they don’t slow down, they will continue to swamp the market and risk pushing prices for their product lower. […]

[…] Government data suggests that despite these companies dialing back drilling plans and spending at the urging of investors, their output continues to grow. The U.S. Energy Information Administration estimates that Appalachian natural-gas production will reach a record this month.

“It doesn’t look like production is slowing down,” Mr. Braziel said.

U.S. production rose to a record of more than 37 trillion cubic feet last year, up 44% from a decade earlier. The U.S. Energy Information Administration, or EIA, expects dry natural-gas production will average 91.6 billion cubic feet a day in 2019, a 10% increase from the 2018 average. Producers in Texas unearth the fuel as a byproduct of oil drilling, and the country is now overflowing with natural gas. […]

[…] Oil prices have been pressured lately by a darkening economic outlook amid weak manufacturing figures from around the world. Attacks on Saudi Arabian oil facilities last month sparked a 15% spike in crude futures, but prices have slid back to pre-attack levels, with U.S. crude trading at around $53 a barrel.

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