Stubborn Natural Gas Supply Imperils Best US Rally in 14 Years

Further Declines

Still, output has proved more resilient than analysts anticipated, making the gas market vulnerable to further price declines. The so-called fracklog, or backlog of wells drilled before 2016 but still uncompleted, in the Marcellus has expanded to about 650 as low prices force producers to reduce expenses, data compiled by Bloomberg Intelligence show. If gas rallies, explorers may start to produce gas from these wells, curtailing a rebound.

Analysts have had a hard time gauging when the tipping point for gas production will occur. This time last year, forecasters were expecting futures to average $3 in 2015. The actual price was almost 40 cents lower. Prices also fell short of estimates in 2014 and 2013.

“Never underestimate the Marcellus,” Mark Hanson, an equity analyst at Morningstar Inc. in Chicago, said by phone May 6. “Hypothetically, if gas goes to $3.50 tomorrow, the Marcellus becomes an insanely attractive play. It would only take 15 or 20 more rigs to ramp up production in a meaningful way.”

- With assistance from Asjylyn Loder. To contact the reporter on this story: Christine Buurma in New York at cbuurma1@bloomberg.net To contact the editors responsible for this story: Lynn Doan at ldoan6@bloomberg.net Jim Efstathiou Jr., Charlotte Porter


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