Both natural gas production and demand in the U.S. continue to drop in an ever-steepening race to find a bottom in the current market environment. Liquified natural gas (LNG) liquefaction continues to plummet, hitting levels not seen since early 2019. While demand remains soft, natural gas supply also reacts to low prices. In the middle of May, EQT Corporation began the curtailment of 1.4 Bcfe/d of production and on May 26, provided an update indicating curtailments would last through Q2 2020. Here we examine how Appalachian production is performing post curtailments and where it may go for the balance of 2020.
The chart below highlights Appalachian production daily from January 2019 through June 3, 2020. Natural gas production grew from an average of 30 Bcf/d in January 2019 to a peak exceeding 33 Bcf/d in November. After hitting new peak levels in late 2019, natural gas volumes went into decline, and volumes leveled off from February 2020 to April 2020, averaging an estimated 31.7 Bcf/d over that time frame.
Following the announcement from EQT of curtailments of 1.4 Bcf/d, natural gas volumes plummeted to the full 1.4 Bcf/d between May 14 and May 16. However, since then, volumes have slowly been drifting higher, ending the month of May nearly 0.6 Bcf/d higher than on May 16. Who has been driving the increase in production since May 16?
The chart below shows production receipts on interstate pipelines where the interconnecting entity is listed as EQT or an EQT subsidiary. While not all of this production is necessarily EQT’s volumes, it does seem to indicate that EQT is at least partially responsible for the increase in volumes since May 16.
While those meters have seen a strong rise after dropping by over 1 Bcf/d on May 16, other meters in Pennsylvania have also been on the rise. Volumes in South PA have been up nearly 0.48 Bcf/d since May 16, but producers in Northeast PA have responded to the shut-ins by adding nearly 0.1 Bcf/d of production.
While producers may have chosen to shut-in volumes when Dominion South prices crashed below $1.00/MMBTU in mid-May following the TETCO explosion, they are starting to show signs of bringing those volumes back online as crude and gas prices rise. With a market struggling to balance supply and demand this summer, producers unwinding curtailments early may find weaker cash markets lie ahead before winter weather moves into the U.S. market. To keep track of this constantly changing narrative and BTU’s forecasts for 23 basis points around the country, request more information on our Gas Basis Outlook.
This article was originally published on the BTU Analytics website.
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