Gas prices tumbled lower for more than a month, since the cold snap ended in the US and Europe in January, with warmer weather prevailing. This has kept the demand low and natural gas lost more than 50% in value during this time, falling below 1.60 on Monday. However, in the last two days, we have seen a swift reversal and decent buying momentum, as a major shale driller intends to reduce the output.

Natural gas in the United States has dropped to the lowest points since June 202 as a result of rising production and decreasing demand brought on by warmer weather. The surge in US gas output this month equaled December’s record-breaking 105 billion cubic feet per day, and it has coincided with the decline in demand. However, the reversal this week has been remarkable, gaining around $0.25 as the price climbed above $1.80. One of the reasons for this reversal is the output cuts that one of the major US shale gas producers announced.

Chesapeake Reducing Gas Production in 2024

Chesapeake Energy plans to reduce its gas production in 2024 due to the current state of the market, characterized by declining gas prices. Chesapeake Energy has already reduced its capital investment estimate by 20% for 2024. This reduction reflects their response to market conditions and their strategy to manage costs.

Additionally, they plan to reduce rig and completion activity. In contrast to the fourth quarter of 2023, where output levels were approximately 3.43 billion cubic feet per day (bcf/d), Chesapeake Energy plans to produce 2.65-2.75 bcf/d of natural gas in 2024.

Gas Price Technical Analysis

This news helped the price of gas yesterday, which is seen approaching the $2.25 level, which could be a technical threshold to some degree. On the H4 (4-hour) chart, the $2.25 level coincides with the 200 SMA (purple line). This convergence suggests that there is notable market activity and interest around this level.

The $2.25 zone served as a support level in the market back in December, after which we saw decent buying interest which sent the price to $23.40s So, the $2.25 level may now act as resistance, so we are keeping an eye on this level.