Natural-Gas Futures Extend Gains

[jpak]

http://online.wsj.com/article/SB10001424052970203718504577180781984236586.html

<snip>

Futures added to Monday's gains that were sparked by Chesapeake Energy Corp.'s decision to cut production in response to low gas prices.

"This is continued momentum from yesterday's announcement from Chesapeake," said Matt Smith, an analyst with Summit Energy. "This has set in a concrete level where production will start to come off."

After gas fell to the lowest price in nearly a decade last week, signs that producers are prepared to turn off the taps have motivated investors to take profits generated from bets on falling prices, a move known as covering a short position.

Chesapeake on Monday said it will immediately curtail 0.5 billion cubic feet a day of gas production, or about 8% of its total output, adding that it could cut an additional 0.5 billion cubic feet a day.

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free market manipulation

yup

[badtoworse]

1. Free market manipulation? Try prudent business management.

Only a moron would maintain high production levels in an oversupplied market and drive the price lower and lower. The people at Chesapeake are not morons.

At some point, the market price for a product is not worth the cost of producing and selling it. A free market does not require that you do it anyway

[FBaggins]

2. "Manipulation" would be if they colude with other producers to do the same thing.

Ceasing production on projects where costs exceed what you can sell the product for isn't manipulation.

If anything, this is the market manipulating the producer... not the other way around.

[OKIsItJustMe]

3. Chesapeake to cut natural gas production

[font face=Times, Serif][font size=5]Chesapeake to cut natural gas production[/font]

9:30 AM, Jan. 23, 2012

[font size=3]NEW YORK (AP) - Faced with decade-low natural gas prices that have made some drilling operations unprofitable, Chesapeake Energy Corp. says it will drastically cut drilling and production of the fuel in the U.S.

Chesapeake, the nation's second largest natural gas producer, said Monday that it plans to cut its current daily production by 8 percent. Over a year, that means the company would produce the same or slightly less natural gas in 2012 than it did in 2011. Chesapeake produces about 9 percent of the nation's natural gas.

That's a change from the dramatic increase in domestic output seen in recent years. Chesapeake and other drillers have learned to tap enormous reserves of natural gas trapped in shale formations under several states using a controversial drilling method known as hydraulic fracturing combined with horizontal drilling. The drillers force millions of gallons of water and sand, laced with chemicals, into compact rock to create cracks that serve as escape routes for the gas.

…

Chesapeake said it would cut its current activity in so-called dry-gas regions by half, to 24 rigs, by the second quarter. That's 67 percent fewer rigs than an average of 75 rigs the company had in use last year.

…[/font][/font]

[OKIsItJustMe]

4. Marcellus Shale Gas Potential Much Lower than Previously Thought

http://www.essentialpublicradio.org/story/2012-01-24/marcellus-shale-gas-potential-much-lower-previously-thought-9967

[font face=Times, Serif]January 24, 2012
[font size=5]Marcellus Shale Gas Potential Much Lower than Previously Thought[/font]

[font size=3]The U.S. Energy Information Administration’s (EIA) latest report finds reserve estimates for the Marcellus Shale formation are dramatically lower than reported last year. The estimate in the Annual Energy Outlook 2012 (AEO2012) is 141 trillion cubic feet of gas, compared to 410 trillion in 2011.

Policy and Communications Director for the Marcellus Shale Coalition, Steve Forde, said that isn’t of much concern, and added that the estimate is simply a “snapshot in time.” He said the coalition will continue to look at longer-term trends.

“Particularly looking back to when we were asking serious questions about where we were going to get energy for future generations, and looking forward now and seeing that there has been an incredible amount of natural gas discovered in this country and is recoverable thanks to technological advances,” he said.

The EIA report states that natural gas production is expected to continue to increase over the coming years, and that by early in the next decade natural gas production in the country will outpace demand. Thanks to Marcellus Shale development, the Commonwealth is already at that point.

…[/font][/font]

(The Commonwealth of Pennsylvania that is…)