Moves by drillers to cut production have failed to stop US natural gas prices from sliding towards a 10-year low.
Nymex April gas on Thursday fell as low as $2.241 per million British thermal units, down 2.7 per cent and close to levels that prompted producers including Chesapeake Energy and ConocoPhillips to reveal plans to reduce output.
Futures lost ground after the US Department of Energy reported underground stocks slipped modestly last week to 2.4tn cu ft, keeping them at a record high for this time of the year. Relentless growth in supply from US shale fields has weakened prices, putting pressure on drillers. While gas has been relatively cheap compared with coal, making it an attractive alternative as a power plant fuel, an abnormally warm winter has undercut demand.
Producers have announced reductions in output totalling about 1.6bn cu ft per day, according to Barclays Capital. But analysts are uncertain of how much drillers will actually cut. Bentek Energy, a gas researcher, said production in February was about 63.5bn cu ft a day, down only about 500m cu ft a day from previous months. Volumes are still almost 6bn cu ft a day greater than a year ago, Bentek said.
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