Chesapeake says $4 natgas too low to grow output

GREENWICH, Conn. (Reuters) – U.S. natural gas prices will have to move higher to spur a resurgence in drilling activity and keep output of the fuel steady, the head of Chesapeake Energy Corp said on Wednesday.

The weak U.S. economy has knocked natural gas prices sharply lower in the past 14 months, and sluggish demand for fuel has prompted producers such as Chesapeake to curtail drilling for new supplies.

“The industry can cope with $4 gas. The industry can’t grow or sustain production with $4 gas,” Chesapeake CEO Aubrey McClendon told an IHS Herold energy conference.

Natural gas futures on the NYMEX rose nearly 6 percent on Wednesday to $3.821 per million Btu, up 37 percent from the seven-year low hit earlier this month, but far below the $13.394 peak reached in July 2008.

Chesapeake and other natural gas producers such as XTO Energy Inc expect the slowdown in drilling will begin to drain near-record supplies of the fuel currently in storage and lead to a price rebound in early 2010.

Reuters