Has Natural Gas Hit Rock Bottom?

OILPRICE,By Nick Cunningham – Jan 20, 2020, 7:00 PM CST

U.S. natural gas prices fell below $2/MMBtu on Friday for the first time in nearly four years.

The gas market is suffering from oversupply, as the shale industry has drilled the market into another bust. The share prices for top gas players were deep into red territory on Friday. Range Resources, for instance, was off by more than 8 percent.

The story has been the same for quite a while. Natural gas production has surged more or less for a decade, and much of it was soaked up by new gas-fired power plants, new petrochemical facilities, or otherwise exported via new LNG export terminals. But production continued to climb, and here we are – a mild start to the winter and prices have fallen off a cliff.

Part of the problem is the ongoing production increases in the Permian with total disregard to any price signal. Permian drillers are after the oil, leading to continued output increases of associated gas, despite prices often traded at or even below zero.

The market has become so depressed that financial pressure in the Marcellus shale is increasing. Chevron took an $11 billion write down in the fourth quarter, much of it the result of its devalued assets in Appalachia. Only days ago, EQT, the largest gas producer in the country, announced a $1.8-billion write down, while Moody’s downgraded the company’s credit rating into junk territory