Declines

Both futures and cash markets fell as low demand and indications of a weakening economy prompted hefty declines.

Chesapeake Energy Corp. CEO Aubrey McClendon appeared to take it on the chin Wednesday, refusing to bow down to reports about the “unprecedented scrutiny” of the company and of himself in recent days, and promised shareholders that the management team is focused on becoming a U.S. oil-weighted giant. However, it’s going to take some time, he said, especially because the turnaround has little operational support from its natural gas-weighted portfolio.

The cash market on average was flat in Wednesday’s trading with gains registered at northeastern points and declines noted in Southern California. Futures made new highs for the recent advance before falling prey to a double-digit drubbing as longer-term weather forecasts called for moderate temperatures in key Midwest and eastern markets and news circulated that a veteran gas trader was closing his hedge fund. At the close of futures trading June had given up 11.8 cents to $2.253 and July had fallen 11.4 cents to $2.354. June crude oil skidded 94 cents to $105.22/bbl.

The Eagle Ford Shale will drive a 15% increase in onshore gas production from the Texas Gulf Coast by November, offsetting declines elsewhere in Texas, according to Bentek Energy LLC. The firm said it expects Texas to be “increasingly long gas in the near term as Eagle Ford production growth continues to outpace demand,” putting downward pressure on regional prices. According to Bentek’s Texas Observer, the state’s supply is up by 1 Bcf/d, or 5%, from a year ago, with the increase driven by growth in onshore production. Demand is up only 0.6 Bcf/d over the same period, according to Bentek. “Due to the combination of Marcellus [Shale] pushback and milder winter weather, net Texas outflows have declined nearly 0.4 Bcf/d since this time last year. As a result, Texas is currently 0.8 Bcf/d longer supply than year-to-date 2011,” Bentek said.

Commissioners in Bradford County, PA — one of Pennsylvania’s most prolific counties for unconventional natural gas drilling — joined nearly all of their contemporaries in the Marcellus Shale and voted unanimously in favor of implementing the state’s impact fee on unconventional gas drilling on Thursday.

Natural gas cash prices continued to erode Thursday as mild weather conditions prevailed in many parts of the country. Declines in the East and Northeast were mostly of the 1-3 cent variety, but on the West Coast losses of close to a dime were noted. Futures traders digested an inventory report showing the first build of the season at 11 Bcf, slightly greater than what traders were expecting and prices fell. At the close of futures trading April was down by 9.1 cents to $2.269 and May settled 8.2 cents lower at $2.372. May crude oil dropped $1.92 to $105.35/bbl.

This year is the first in a multi-year period of growth for Noble Energy Inc. as the company realizes the payoff from “multiple years of exploration success,” CEO Charles Davidson told financial analysts Thursday during an earnings conference call. However, dry gas production from the Marcellus Shale is not part of the windfall, at least not for a while.

Trends toward milder temperatures prompted price declines at a large majority of points Friday. The bearish weekend impact of reduced industrial load was heightened by the Christmas holiday being taken off Monday.

Prices were close to a complete turnaround Wednesday from the declines at nearly all points that had begun the week’s trading. Only three Gulf Coast drops of a couple of pennies were left out of flat or higher numbers elsewhere.