"About a third of U.S. gas production is associated gas - produced from oil wells," said Jacques Rousseau, a managing director at research firm ClearView Energy Partners LLC. "This production is unlikely to decline given current oil prices." The Permian basin of Texas and New Mexico, the nation's biggest shale field, is hitting record monthly highs in oil output this year, according to U.S. Energy Information Administration (EIA) data. Gas from the Permian also has climbed to record highs every month this year.
So, while U.S. gas futures were down by 50% in the first quarter of 2023, at $2.22 per mmBtu, they are not low enough to forestall output gains, say analysts.
"Gas prices are begging the market to cut back on supply, amid falling U.S. consumption and constrained LNG export options," said Stephen Ellis, an energy strategist at Morningstar Research Services LLC.
PRODUCTION REMAINS STICKY
U.S. gas production remains on track to hit 100.67 billion
cubic feet per day (bcfd) this year, up from last year's record
98.09 bcfd, according to the U.S. government.
Projected U.S. gas usage, including exports, will ease to
107.3 bcfd this year from a record 107.4 bcfd last year due to
expected declines in domestic consumption from residential,
commercial, industrial and power generation customers.
That usage drop comes despite an expected 14% increase in
U.S. liquefied natural gas (LNG) exports now that Freeport LNG's
export plant in Texas has returned to production after an
eight-month outage.
When operating at full power, Freeport LNG, which shut after
a fire in June 2022, consumes about 2% of total U.S. gas supply.
Despite low gas prices, U.S. drillers have 160 rigs seeking
gas up 16% from a year ago, according to data
from Baker Hughes Co . Gas output in the Haynesville shale field in Arkansas,
Louisiana and Texas where Chesapeake and Comstock are dropping
rigs, also is on track to reach fresh highs in March and April,
according to the EIA.
(Reporting by Scott DiSavino;
Editing by Sandra Maler)
