Hey planet, you are “in a world where many decision makers have lost sight of the value of plentiful and affordable energy.”
Our Take, with Doug Sheridan
Our Take, with Doug Sheridan
Hey planet, you are “in a world where many decision makers have lost sight of the value of plentiful and affordable energy.”
Per the WSJ, adjusted for inflation, natural-gas futures recently hit their cheapest prices since trading began on the New York Mercantile Exchange in 1990. Aside from a dip below $1.50/MMbtu during the 2020 Covid market crash, natural-gas prices haven’t been so low in nominal terms since 1995.
Chesapeake Energy, one of the country’s biggest producers, said this past week it would cut its 2024 spending by 20% from earlier plans and throttle back output by roughly 20% compared with last year.
The company said it would drill but not complete wells for the remainder of the year, leaving gas in the ground until prices rise. Analysts and execs expect that to happen late this year and in 2025, when the next wave of new export terminals start shipping out LNG. “The market is clearly oversupplied,” said Chesapeake's CEO.
Another very warm winter hasn't helped, with gas that isn’t being burned in furnaces and boilers is backing up in storage facilities—which hold 22% more gas than the five-year average for this time of year. Analysts say domestic storage capacity is in danger of filling up later this year unless prices are low enough to curtail production and entice electricity generators to switch from burning coal to gas.
As a result, some traders are betting it could get quite ugly for gas producers. Put options have recently traded with strike prices as low as 50 cents per MMbtu.
Our Take 1: As producers adapt to the challenge and strive to become more resilient and efficient, let's not miss the fact that low prices, despite the hardship to the industry, are a reminder of the competitiveness of natural gas. This matters in a world where many decision makers have lost sight of the value of plentiful and affordable energy.
Our Take 2: Natural gas is a winner for the times. Today's market only further underscores this point.