NorthAmOil: Natural gas glut leads to production cuts

An oversupply of natural gas in the US has been driving down prices, leading to further cutbacks in US drilling, despite the hottest summer in the contiguous US on record. The summer is when nat gas-fuelled power plants provide more electricity for air conditioners.

Supplies are simply out-weighing demand. So major producers like EQT and Coterra Energy are scaling back production, delaying new drilling and waiting to connect wells to pipelines to support prices, which remain unusually low for this time of year, said the Wall Street Journal (WSJ).

On August 19, Henry Hub benchmark natural gas futures closed at $2.235 per million British thermal units (mmBtu), a drop of 15% compared with last year and 29% below their mid-June peak.

Earlier in August, prices had dipped below $2 before producers began announcing output reductions. Aside from the COVID-19 lockdown in 2020, summer natural gas prices have not been this low since the 1990s.