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Low Natural Gas Prices Do Impact Shale Production

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I read an article via Bloomberg that might be of interest to those anticipating that natural gas prices will fall as soon as winter ends. In fact, some are expecting (or maybe just hoping) that shale gas will save the day and push natural gas futures (NYMEX) back to the lows of 2012.

Just this week, Chevron, a leading international energy supplier, as well as an active shale gas driller, announced that it will curtail some drilling in the Marcellus Shale play in Pennsylvania because of low regional natural gas prices.

This is evidence that shale gas drilling economics are a factor that can provide support to regional natural gas and electricity prices, since natural gas is a primary source of fuel for power generation.

This does not mean that prices will rise, but it does demonstrate that low prices reduce the incentive to bring more supply to market by some drilling companies.

Posted: March 14, 2014