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Chesapeake Spurs Nat Gas Rally

Thursday, 9 Feb 2012 | 12:54 PM ET

Traders covered short positions in natural gas futures after an executive from Chesapeake Energy reiterated that low prices may force the company to significantly cut gas production.

Despite a bearish surprise from the U.S. Energy Information Administration's report showing a smaller than expected drop in natural gas in storage last week — March natural gas futures surged 5 percent to reach an intraday high of $2.57 per million BTUs.

Speaking at a Credit Suisse event earlier Thursday morning, Chesapeake's Senior VP of Investor Relations Jeff Mobley said the company has already curtailed a little more than 500,000 cubic feet per day of natural gas production and will go to 1 billion cubic feet per day if market conditions warrant.

"All numbers are consistent with guidance our previous news release (from January 23rd)," according to a Chesapeake spokesman. Natural gas futures spiked 30 cents on that day, rebounding from a decade low for natural gas prices.

Nat Gas Inventories Slide
CNBC's Sharon Epperson takes a look at the natural gas inventory report, indicating that inventories dipped 78 BCF.

"On January 23rd, there was a lot of excitement about Chesapeake cutting half a billion cubic feet a day of natural production. That's the part that traders heard. What they hear now is up to 1 billion cubic feet a day," says CitiFutures energy analyst Tim Evans.

"The facts haven't changed but people's eyes are open wider and they're focusing on a different part of the statement than they did before. And they're buying natural gas."

Follow Sharon on Twitter: @sharon_epperson

Disclaimer

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  • Patti Domm

    Patti Domm is CNBC Executive Editor, News, responsible for news coverage of the markets and economy.

  • A CNBC reporter since 1990, Bob Pisani covers Wall Street from the floor of the New York Stock Exchange.

  • Sharon Epperson is CNBC's senior commodities and personal finance correspondent.

  • JeeYeon Park is a writer for CNBC.com. Follow her on Twitter: @JeeYeonParkCNBC

  • Rick Santelli joined CNBC Business News as an on-air editor in 1999, reporting live from the floor of the Chicago Board of Trade.

  • Senior Producer at CNBC's Breaking News Desk.

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