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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