Oil prices have been lousy for so long that U.S. producers are hoarding unfinished wells rather than pumping crude out of them. In the natural gas patch, just the opposite is happening.
While the energy slump has idled lots of wells for both commodities, their economics have diverged. Oil remains at half its price in 2014, leading to a record backlog of drilled-but-uncompleted wells spread across shale formations where fracking brought on a surge in crude production. Meanwhile, gas futures are almost double last year’s low, and the so-called fracklog of wells in the Marcellus gas fields of Pennsylvania and West Virginia is shrinking as drillers there unleash supplies to take advantage of higher prices.
By the end of June, the fracklog in the Marcellus was the smallest in the three and a half years since government data has been collected. The drop portends a production boom that could imperil bullish gas bets, which jumped to a three-year high in May on speculation that a hot summer, new pipeline capacity and rising exports of the fuel would boost demand.
Gas explorers are “putting a down payment on a bull market that companies hope is coming,” said John Kilduff, a partner at the commodities hedge fund Again Capital LLC. They’re “taking the view that prices are going to rebound.”Click here to view more.
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