March 16 (Bloomberg) -- Natural gas drillers from Devon Energy Corp. to XTO Energy Inc. are idling rigs at the fastest pace since 2002, setting the stage for this year’s worst commodity to almost double as supplies drop faster than demand.
About 45 percent of U.S. rigs have been shut since September, which means fourth-quarter gas production will tumble 5.2 percent, faster than the 1.9 percent decline in use, the Energy Department forecast. Prices will rise to $7 per million British thermal units by January from $3.824 today on the New York Mercantile Exchange, according to a Bloomberg News survey of 20 analysts. The gain would be the largest since the first half of 2008.
The last time drillers stopped rigs at this pace was seven years ago, when futures advanced 86 percent. The world’s biggest hedge funds have already started to close bets on a drop in prices, government data show. Natural gas tumbled 30 percent this year, the worst start since 2006, as sales weakened with the recession.
“When the recession ends and the economy starts booming, we’re going to have less natural gas than we do today and prices are going to spike back up,” said Larry Nichols, chief executive officer of Devon Energy Corp., the largest independent oil and gas producer.
MAE Price at posting:
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