Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Natural Gas: With Demand In Limbo, Shale Bankruptcies May Be The Answer

By Investing.com (Barani Krishnan/Investing.com)CommoditiesApr 02, 2020 04:41AM ET
www.investing.com/analysis/natural-gas-with-demand-in-limbo-shale-bankruptcies-may-be-the-answer-200520371
Natural Gas: With Demand In Limbo, Shale Bankruptcies May Be The Answer
By Investing.com (Barani Krishnan/Investing.com)   |  Apr 02, 2020 04:41AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

Five cents — that’s what U.S. natural gas’ average daily range has been over the past week, after the gyrations of mid-March, as traders wonder if there’ll be any reprieve for the market in a seasonably lean period for demand.

Gas prices are bobbing not far from 25-year lows hit on March 23 as production remains higher than necessary in a nation where lockdown measures to contain the coronavirus outbreak have slashed commercial demand for heating, leaving domestic consumption as the only source of prop.

Natural Gas Futures Weekly Chart
Natural Gas Futures Weekly Chart

Spring has, meanwhile, arrived, bringing temperatures that will only get less chilly and warmer in the coming weeks — creating comfortable environments where the need for neither heating nor air-conditioning will be great. 

This isn’t a season where gas prices typically do well and economic disruptions from COVID-19 are only making them worse.

Data showed gas production in the lower 48 U.S. states averaging 92.92 billion cubic feet per day last week, just slightly lower than the 93.59-bcfd average recorded in the previous week to March 20.

In a situation where gas drilling rigs don’t get cut fast enough to reduce the supply landing on the market, the other hope will be that more drillers go belly up — forcing abrupt disruption to production.

More Shale Drillers Could Go Bust In Q2

Bankruptcies in the U.S. oil patch are expected to gain momentum in the second quarter, accelerating as some drillers are forced to shut in production amid reduced oil demand and low available storage capacity, Buddy Clark, a partner and co-chair of energy practice group at Haynes & Boone told the Wall Street Journal.

A number of oil and gas companies, including Chesapeake Energy (NYSE:CHK), Ultra Petroleum (OTC:UPLC), and California Resources (NYSE:CRC), have either warned they may not stay current on their debts or hired restructuring advisers to negotiate with creditors.

“With the implications of COVID-19 still unraveling, gas bulls continue to monitor news from U.S. producers on how they’re managing the new reality of widespread anemic demand and historically low oil prices. Every day, a new slate of producers are announcing plans to dramatically cut spending and activity,” Leticia Gonzales at naturalgasintel.com wrote in a commentary on Wednesday.

Gonzales adds:

“It’s still early in the game. Although dozens of exploration and production companies have made major changes to their budgets and production outlooks, several more announcements lie ahead. Furthermore, guidance is far from set in stone.”

On Wednesday, Whiting Petroleum (NYSE:WLL), one of the largest drillers in North Dakota’s Bakken Shale, filed for bankruptcy protection, becoming the first sizable fracking company to succumb to the COVID-19 induced oil price crash.

But Whiting Petroleum — as its name suggests — is primarily an oil producer which generates gas as a by-product. The driller produced 3.4 million barrels of oil and 10.2 million metric cubic feet of natural gas in 2019, according to Colorado Oil and Gas Conservation Commission records.

Whitin's gas volume is minuscule compared to the 2.6 billion cubic feet produced per day by Chesapeake Energy (NYSE:CHK), the second largest U.S. gas driller which operates from the Rockies to Texas to Pennsylvania.

But Fewer Gas-Focused Bankruptcies Could Complicate Matters

Aside from Chesapeake, the other four big gas U.S. producers include oil majors Exxon Mobil (NYSE:XOM) and BP (NYSE:BP), as well as Anadarko and Devon Energy (NYSE:DVN) — all of whom aren’t really in dire straits at the moment.

That narrows the immediate prospects for gas-focused bankruptcies and could leave the market not far from its current range of $1.58 to $1.63 per million metric British thermal units as it waits out data on gas stockpiles over the next few weeks.

In Wednesday’s session, the front-month gas contract on the New York Mercantile Exchange’s Henry Hub fell 5 cents, or 3%, to $1.59 per mmBtu.

The drop came despite expectations that the U.S. Energy Information Administration will issue 10:30 AM ET (14:30) today a relatively better gas storage report for the week ended March 27 compared to the prior March 20 week.

Analysts tracked by Investing.com called for a draw of 24 bcf from storage for last week,  compared with an increase of 6 bcf during the same week a year ago and the five-year (2015-2019) average withdrawal of 19 bcf for the period.

Disclaimer: Barani Krishnan does not own or hold a position in the commodities or securities he writes about.

Natural Gas: With Demand In Limbo, Shale Bankruptcies May Be The Answer
 

Related Articles

Phil Flynn
Energy Report: Get Out Of The Way By Phil Flynn - Apr 14, 2021 2

If the International Energy Agency (IEA) sounds bullish then oil bears had better get out of the way. Oil prices might be breaking out of their month-long wicked trading range...

Natural Gas: With Demand In Limbo, Shale Bankruptcies May Be The Answer

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (10)
Patron Silver
Patron Silver Apr 08, 2020 1:28AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
sorry bub most people are home using what u guessed it NG
gagan jain
gagan jain Apr 02, 2020 8:51PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Guys my gut feeling all the top level analyst are on payrolls of some big fish in this ocean, just check out the Henry Hubs futures of May, the story will be clear if you can hold for now (next month) you will end up doubling your investment in another year
gagan jain
gagan jain Apr 02, 2020 8:46PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
It's just those guys who went long on Crude and short on NG, who are trying to hedge position again and trying to shun of the retail investor, all these games are just to write off the retail investor, be sure to hold for end of 2020 and 1st quarter of 2021
Green Greta
GreenGreta Apr 02, 2020 6:44PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
4.9-1.5 they would rather go bankrupt than cap wells. They deserve bankruptcy. Every single one for responding so greedily. They made me go broke by crashing NG to lowest prices ever, so I'll just sit back and enjoy watching them lose it all too. But the more on CEOs at top will secure huge payouts to themselves. Disgusting world we live in.
gagan jain
gagan jain Apr 02, 2020 6:44PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
I am not giving up please check the Henry Hubs futures prices for Mat
gagan jain
gagan jain Apr 02, 2020 6:44PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
May *
Ritul Parikh
Ritul Parikh Apr 02, 2020 10:24AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Hi Barani... what is your pridiction for the bottom in natgas??? pls advise thank you...
Green Greta
GreenGreta Apr 02, 2020 10:24AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
He didn't expect 2 to break months ago, then thought 1.6 would serve as support. Now we're at 1.5 lowest ever if you account for any inflation.
Banana Citizen
Banana Citizen Apr 02, 2020 9:52AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Junk bond funded Shale/Fracking is a bankrupt industry, if not what is it Welfare industry with Trump shaleout tax payers money?
Jose Emenis
Jose Emenis Apr 02, 2020 8:32AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Car companies, dairy farmers, cruise ships, hotels, Wall Street banks, and airlines should go bankrupt, too....
Barani Krishnan
Barani Krishnan Apr 02, 2020 8:32AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Don't mean to be Dr. Doom but the outlook isn't too great at the moment.
Jose Emenis
Jose Emenis Apr 02, 2020 8:32AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Barani Krishnan - The big energy players are still in good shape.... Maybe Trump is willing to sacrifice all the small and midsize drillers.... Trump will eliminate Exxon's and Chevron's competition for contributions to his Presidential campaign?
Barani Krishnan
Barani Krishnan Apr 02, 2020 8:32AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Yes, for sure. The big 5 in gas, Chesapeake aside, still have good balance sheets.
Hank Williams
Hank Williams Apr 02, 2020 8:23AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
This article is a joke & not a haha joke either. Today will likely be a draw in gas storage with the mildest weather of the year that we will see. And meanwhile oil just had a record build in inventories & everyone is rushing to save oil & prop it up as though we needed that for some reason. We will see at least four more mega builds in oil product over the next month due to complete demand destruction. Meanwhile, as natural gas prices continue to get pummeled, we are facing a huge shortage by late summer.
Barani Krishnan
Barani Krishnan Apr 02, 2020 8:23AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
The jury is still out on that (huge summer shortage), Hank. However, this story is about natgas in spring. I'm not discussing summer at all. Understand the point I'm making before making some snarky comment simply because what I've said doesn't align with your position. I know how you feel about oil. But this isn't gas bashing. It is what it is.
Pham Ngoc Tien
Pham Ngoc Tien Apr 02, 2020 8:19AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
How is your prediction for oil price next weeks? Thank you
Barani Krishnan
Barani Krishnan Apr 02, 2020 8:19AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
We seem certainly headed for the teens.
Cristian Chibato
Cristian Chibato Apr 02, 2020 6:27AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Why is everyone questioning demand, which is clearly shown through resilient withdrawals in the mildest part of march? But they're so mystically unsure of the supply disruption, which is also literally shown in hard figures
Johan Nachmanson
Johan Nachmanson Apr 02, 2020 6:27AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Agreed. Very very weird. Paper market is 100% manipulation. However, we will see a monster gap up soon as soon as Coronavirus curve flattens
Barani Krishnan
Barani Krishnan Apr 02, 2020 6:27AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
The weather anticipation for the coming weeks I know different from the usual seasonal trends and that's what the story is about. Of course as it gets hotter, We will see more consumption in the market could be better. But until the shutdowns end, this is the way it is. That's what the story is about.
Barani Krishnan
Barani Krishnan Apr 02, 2020 6:27AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
* meant to say that the weather anticipation in coming weeks is NO different (typo earlier)
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email