U.S. natural gas production in February fell slightly from January's record high according to government data on Monday, stirring expectations that an over supplied gas market might finally tighten and help pull up historically low prices.
Lower 48 "wet" or gross gas output in February totaled 72.32 billion cubic feet per day, down 0.42 bcf per day, or 0.6 percent, from downwardly revised January output of 72.74 bcf daily, the Energy Information Administration said in its Monthly Natural Gas Gross Production Report.
Lower 48 refers to gas production in the United States, excluding Alaska and Hawaii.
EIA's previous estimate for January was 72.85 bcf per day.
"This was the biggest monthly decline ... going back to the freeze-offs 12 months ago. Production was set to taper with some real rigs coming off though this isn't that big of a deal," Gelber & Associates analyst Pax Saunders said in a report.
Saunders, noting that monthly output above 70 bcfd was still large, said fundamentals for gas were still weak.
It was only the second monthly gross gas output drop in the last 12 months.
Natural gas prices slid to a 10-year low of about $1.90 per mmBtu just two weeks ago, but have since rebounded nearly 20 percent amid talk of producer supply cuts and some supportive weather. But many traders remain skeptical of the run up with inventories and production still at or near all-time highs.
Traders have been looking for signs that historically low gas prices might finally force producers to slow record output.
Baker Hughes data on Friday showed the gas-directed rig count slid by 18 last week to 613, its lowest since April 2002.
The nearly steady drop in dry gas drilling -the gas rig count is down 35 percent since peaking at 936 in October- has raised expectations that producers were getting serious about reducing gas supplies.
While lower 48 gross gas production is running at 6.8 bcf per day, or 10.4 percent, above the same year-ago month, traders noted that output was cut sharply in February 2011 by well freeze offs in the Southwest from some extremely cold weather.
Louisiana saw the largest percentage monthly decline of 4.8 percent as some operators reported lower production.
"Other States" production continued to increase, up 1.2 percent, with new wells in Colorado and the Marcellus shale play contributing to the gain.
PRODUCER CUTS SPUR PRICES
Royal Dutch Shell on Thursday said it would be switching the bulk of its gas drilling program in the United States toward the production of "wet" natural gas and away from "dry" gas.
Encana, Canada's largest gas producer, on Wednesday also raised expectations about more gas supply cuts.
Chesapeake and Conoco had already announced some production cuts this year, but so far the reductions have not significantly slowed pipeline flows, which are still hovering near record.
Analysts say any slowdown in dry gas output could take a lot more time, noting increased drilling in more-profitable shale oil and shale liquids prospects still produces plenty of associated gas that ends up in the market after processing.
EIA note-Gross withdrawals are converted to marketed natural gas production by subtracting gas used for repressuring, quantities vented and flared, and nonhydrocarbon gases removed in treating or processing operations.
Source: Reuters