<article><p class="lead">US natural gas producers and pipeline companies besieged by low prices have struck an optimistic tone on falling supplies, even as demand remains muted in an economy still reeling from the Covid-19 pandemic.</p><p>That newfound positivity is pinned to a $3/mmBtu price next winter and the prospect that the oil market collapse could finally remedy the gas supply glut. </p><p>The outlook for gas prices heading into this spring was especially dim, after prompt-month prices tumbled below $2/mmBtu in January. Stockpiles of the fuel had swelled above average because of a mild winter and new supplies reaching market from associated gas — those volumes that come from oil wells.</p><p>But then in late February, oil prices began a steep decline amid ample supplies, soon exacerbated by measures to contain the pandemic. Producers large and small, such as Occidental Petroleum, ConocoPhillips and Continental Resources, cut production and shuttered wells, immediately lowering output of crude — and of associated gas.</p><p>"We have already become a beneficiary of the corrected oil market," Jay Allison, chief executive of gas producer Comstock Resources, said during a conference call to discuss the company's first quarter earnings. "We only become stronger," as low oil prices curtail output. </p><p>Gas infrastructure company Williams last week said that producers are planning for growth because of gas price gains but have not committed to it just yet. </p><p>Producers will "pull those triggers when they are confident these prices are something they can lean into," Williams chief executive Alan Armstrong said. </p><p>Gas prices had tumbled to a near 25-year low in early April as supplies remained robust and the market transitioned to its low-demand spring shoulder season. Those low prices cast a long shadow over the US gas market. </p><p>Producers in some of the most prolific US gas fields had already pulled back on plans to grow in the coming year, biding time until prices recovered. Chesapeake Energy, once a high-flying US shale producer, said the one-two punch of low and volatile oil and natural gas prices have created substantial doubt in its ability to continue as a going concern.</p><p>Gas prices briefly spiked above $2/mmBtu last week as oil production cuts gained momentum and a rupture on a major US gas pipeline stoked some supply concerns. Prices have retreated from those levels on headwinds from lower demand for US LNG this summer.</p><p>Companies wedded to gas prices still face near-term uncertainties. The magnitude of the declines in gas output remains to be seen, and industrial gas demand is forecast to plunge this year because of the pandemic.</p><p>About 3 Bcf/d (85mn m³/d) of associated gas production has recently gone off line, consulting firm BTU Analytics estimates, and another 2 Bcf/d should be shuttered by June. </p><p>The EIA said this week that it expected overall US gas consumption to drop this year to 81.7 Bcf/d, a decline of 3.7pc from 2019 levels, as industrial demand tumbles by 7.1pc on reduced manufacturing activity. </p><p>In addition, buyers of US gas exports in the form of LNG have already cancelled more than 20 cargo loadings in June, potentially leaving to more than 3 Bcf/d of supplies without a home in the US. </p><p>Still, the industry can take some comfort in Nymex gas futures that show prices near $3/mmBtu early next year. The January 2021 contract today settled at $2.94/mmBtu.</p><p class="bylines"><i>By Jason Womack</i></p></article>
