May 19, 2020 / 6:41 PM / 11 days ago

EQT cuts U.S. production as coronavirus depresses natgas prices

(Reuters) - EQT Corp, the biggest U.S. natural gas producer, said on Tuesday it started to reduce gas output in Pennsylvania and Ohio on May 16 as demand destruction from the coronavirus cut current prices for the fuel.

Although EQT did not say how much gas it would curtail, U.S. pipeline company EQM Midstream Partners LP said in a federal securities filing that its largest producer customer started planned temporary production curtailments of up to about 1.4 billion cubic feet per day (bcfd) in the two states on May 16.

EQM was once a unit of EQT. EQT’s Pennsylvania and Ohio wells are part of the Marcellus and Utica shale formation.

In 2019, EQT produced about 4.1 bcfd. One billion cubic feet of gas can supply about 5 million U.S. homes for a day.

U.S. gas production and demand is expected to drop in 2020 and 2021 from record highs last year as government steps to slow the spread of coronavirus curtailed economic activity and energy prices, according to federal estimates.

“Like others in the natural gas industry, we are anticipating a significant increase in natural gas prices from current levels in just a few months,” EQT said in an emailed statement.

U.S. gas futures were down about 16% since the start of the year. Looking forward, however, analysts expect prices will rise as governments lift travel restrictions.

Futures for the balance of 2020 and calendar 2021 were trading about 25% and 50% over the June front-month, respectively.

“To best capture value from this scenario, starting May 16, we began to temporarily curtail production from certain of our wells in Pennsylvania and Ohio, thereby deferring sales into the more favorable gas pricing environment,” EQT said.

It said it “will be monitoring the market to determine the optimal time to return production online.”

Reporting by Scott DiSavino; Editing by Sonya Hepinstall

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