Something gassy this way comes
A celebrity death match between pragmatism and the illusion of energy independence
U.S. gas producers are indicating they have no big production growth plans for this year
European gas buyers remain largely opposed to long-term LNG commitments
The price of spot-market gas diversification is going to rise higher
Earlier this month, two U.S. gas industry executives made quite interesting statements. First, the CEO of EQT told Bloomberg that the latest drop in natural gas prices may curb production growth this year. Then, the CEO of Chesapeake told Bloomberg pretty much the same.
The reasons that the two executives gave for their predictions — or rather plans — were also pretty much the same and came down to the fundamental balance between supply and demand. When the latter drops, so does the former. The twist is that demand for gas globally is not really falling, not organically, at least. It might all get tricky by this year’s winter season.
Natural gas prices in the United States have shed as much as 50% in about a month, thanks, first, to a warm winter and, second and consequent, the fuller than usual gas storage in Europe. This has prompted EQT’s chief executive Toby Rice to say that predictions of a 3-billion-cu-ft increase in daily gas output in the U.S. may be “a little ambitious.”
“You are going to see an operator response and slow down in the activity levels,” Rice told Bloomberg, adding that besides gas prices, inflation will also act as a deterrent to production growth this year.
Chesapeake’s Nick Dell’Osso was even more straightforward: “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.”
Sound familiar? It’s what OPEC says about oil when prices fall. It’s what any producer of a commodity would say when prices fall and, importantly, there is minimal certainty about the longer-term demand prospects of that commodity, courtesy of energy transition ambitions. Right now, certainty about the future of gas demand is as minimal as it can be. Cue the suspenseful music.
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