Photo: The Lost Ogle
For the past 12 months, the amount of natural gas in storage has hovered between an enormous 2,500 and 3,000 billion cubic feet, an unprecedented volume that owed its existence to the shale drilling bonanza that has swept the country.But the laws of economics appear finally to be kicking in, and today, Aubrey McClendon, CEO of Chesapeake Energy, the country’s second-largest natural gas producer, said he expects to consistent declines in gas storage moving forward.
This will partly be driven by the company itself: in its Q2 earnings call today, McClendon said the company hopes to reduce its dry gas wells to 7 or 8 in the next 12 months — compared with the dozens it currently has active.
McClendon said the company would not seek to move back into natural gas production until prices moved back to $5.
Compare that with the $3 price at which contracts currently trade.
This does not mean that fracking activity will end — McClendon said the company is now going to lean hard into oil and liquid natural gas production, much of which will still be extracted out of shale plays.
And even as it has risen off record-low prices of around $2.50 earlier this year, natural gas still has room to run to catch up with its mid-2000s average of above $5.
But going forward — and barring more mild weather — expect to see a continuous decline in storage volumes, and subsequently steadily higher prices.