Summary
U.S. dry gas production is experiencing a decline as prices plummet, exacerbated by overproduction and a lack of coordinated output cuts similar to those seen in the oil sector. In July 2024, dry gas production averaged 104.3 billion cubic feet per day, marking a minimal increase from the previous year, while the seasonal increment was the smallest since the COVID-19 pandemic.
The price slump has been significant, with front-month futures dropping to around $1.80 per million British thermal units between February and April 2024, the lowest level in over three decades when adjusted for inflation. This drastic decline in prices has led to fewer drilling rigs being active, with an average of fewer than 100 rigs in the third quarter of 2024, down from nearly 160 in the same period of 2022. The combination of mild winter temperatures in 2023/24 and high inventory levels has intensified the crisis, prompting major U.S. producers to announce plans to curb drilling and production. Despite these challenges, the ultra-low prices have spurred record gas consumption by power generators, helping to gradually normalize inventory levels. If production remains subdued, the surplus is expected to diminish during the winter of 2024/25, potentially leading to a rebound in prices and production in 2025 to meet growing demand.
Key Factors Impacting Production
- Price Decline: The average price for front-month futures dropped significantly, affecting producers’ willingness to drill.
- Rig Count Reduction: The number of active drilling rigs has decreased sharply, indicating reduced exploration and production activity.
- Inventory Levels: Near-record stock levels at the end of the heating season have compounded the issue, leading to a surplus.
- Demand Dynamics: While production has slowed, there has been a surge in gas consumption by power generators, which may help alleviate inventory pressures moving forward.
Future Outlook
If current price trends continue, production growth could approach zero by late 2024 or early 2025. However, once the surplus is eliminated, a substantial increase in both prices and production may be necessary to satisfy the anticipated rise in demand from generators and exporters.
US Oil And Gas Output Slide, Squeezed By Lower Prices
Oct. 2 / Zerohedge / Presents a comprehensive overview of the challenges facing U.S. oil and gas output, mirroring insights from other sources while emphasizing the impact of price fluctuations and inventory levels on production. While informative, it risks redundancy with similar analyses, lacking unique angles that might engage readers more effectively. “ By John Kemp, energy analyst U.S. oil production growth continues to slow in response to the fall in prices, as the initial shock from Russia’s invasion of...
Low Prices Squeeze U.S. Oil and Gas Output
Oct. 2 / Oil Price / Offers a detailed analysis of the decline in U.S. oil and gas production, effectively contextualizing it within broader market dynamics and geopolitical influences, making it a solid resource for understanding current trends. The authoritative voice of John Kemp lends credibility, though the article could benefit from a more concise presentation of key points to enhance clarity. “ U.S. oil production growth continues to slow in response to the fall in prices, as the initial shock from Russia’s invasion of Ukraine and the sanctions...