US September nat gas output down despite higher prices

Gross US natural gas output declined in September from a month earlier, signaling that a rebound in prices has yet to result in production growth.

Production from the Lower-48 US states, which includes volumes that do not reach market, fell in September to 79.83 Bcf/d (2.3bn m³/d), down by 562mn cf/d, or 0.7pc, the US Energy Information Administration (EIA) said today in its monthly production report. September output was down by 2.9pc from a year earlier and 3.3pc below the all-time high of 82.59 Bcf/d hit in February 2016.

Year-over-year declines in production have provided a boost to gas prices and stoked concerns that winter demand may tax high gas inventories in the coming months. At the same time, US gas exports are growing and electric utilities are leaning more heavily on gas to meet customer demand following coal plant retirements.

Nymex prompt-month gas prices rose this week above $3.30/mmBtu, up by more than 45pc from a year earlier. Spot prices at the Henry Hub in September were up by a smaller margin, increasing by 12pc from a year earlier to an average of $2.96/mmBtu.

Gas production fell in large producing states such as Texas, West Virginia and Pennsylvania. Output from Texas, the largest gas-producing state by volume, dropped in September to 21.81 Bcf/d, down by 1.2pc from August and 11pc lower than a year earlier.

Output from Pennsylvania and West Virginia, home to the mammoth Marcellus shale gas field, fell in September by 2.4pc and 0.5pc, respectively, from the previous month. But Pennsylvania production was still 13.96 Bcf/d, up by 5.2pc from a year earlier, while West Virginia production rose year-over-year to 3.83 Bcf/d, a 2.5pc gain, the EIA said.

In contrast, production from Ohio, which sits atop the fast-growing Utica shale, rose in September to 4.38 Bcf/d, a gain of 2.4pc from August and a year-over-year increase of 47pc.

The recent run-up in gas prices could help mitigate overall US gas production declines. The EIA has said that production may rise this month on higher prices and a rebound in drilling activity.

The US natural gas rig count rose last week to 118, up by two units from the prior week and an increase of 37 rigs since the count dropped to a 2016 low in late August. The gas rig count has increased for six of the last seven weeks but is still down by 38pc from a year earlier, according to oil field services provider Baker Hughes.