Chesapeake Spurs Nat Gas Rally
CNBC Senior Commodities Correspondent & Personal Finance Correspondent
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.
"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."
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