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By John Kemp

Welcome to Power Up. U.S. gas producers have announced sharp cuts in drilling and output after futures prices fell to their lowest level for more than three decades after adjusting for inflation. The sector has finally been forced to acknowledge persistent over-production as a mostly mild winter caused a further accumulation of already-bloated inventories.  

Stocks are above normal throughout North America and Europe, depressing prices to force output cuts and encourage more consumption by generators and industrial users. But eliminating excess stocks will not be easy; more associated gas is still coming from oil wells even as gas-focused drilling is scaled back.  

Today’s top headlines: 

U.S. gas prices jump after Chesapeake cuts output 

U.S. transmission grids seek more gas coordination 

White House expected to increase ethanol blending 

A flare burns excess natural gas in the Permian Basin in Loving County, Texas. REUTERS/Angus Mordant

Chesapeake Energy announced plans to cut production by 30% in 2024 in response to a market that is “clearly oversupplied”. Chesapeake, which will become the country’s largest gas supplier after its merger with Southwestern Energy, is following others, including Comstock, Antero and EQT , announcing cuts to drilling or production plans. Front-month futures prices jumped by 13% on the announcement but the increase was from the lowest level in real terms since futures started trading in 1990.  

A sign advertising E15, a gasoline that contains 15% ethanol, is seen at a gas station in Clive, Iowa. REUTERS/Jim Young

The Biden administration is poised to approve a request from Midwest governors to allow sales of E15 gasoline throughout the year but will push the start date back to 2025. Higher blend rates will increase demand for ethanol and therefore maize, as the administration tries to help farmers ahead of presidential and congressional elections in November. Net farm incomes are forecast to decline sharply this year as a result of slumping crop prices and the increasing input costs; broadening the ethanol mandate has become a top political priority.  

A view of the logo of the International Energy Agency in Paris. REUTERS/Sarah Meyssonnier

The International Energy Agency celebrated the 50th anniversary of its founding at a ministerial meeting in Paris. But tensions surfaced between its traditional role as an energy security advisor and its new mission as a climate policy advocate and scorekeeper. The agency insists an integrated approach is essential, but critics challenged the realism of its projections showing an early peak in fossil fuel consumption.  

A ton of nickel powder made by BHP Group sits in a warehouse at its Nickel West division, south of Perth, Australia. REUTERS/Melanie Burton

Australia’s federal government has designated nickel a critical mineral to unlock financial support for domestic producers hit by growing output from Indonesia and slumping prices. But the support on offer is unlikely to solve the industry’s problems. If it is serious about helping the industry, the government will have to follow through on ideas to promote separate markets and prices for low-emission (Indonesian-origin and Chinese-owned) and high-emission (Australian-made) metal.  

Several ageing U.S. refineries are being marketed for sale by their current owners but have found no buyers. Valuation gaps remain as facilities require expensive renovation while domestic demand for gasoline and diesel is expected to fall owing to policies to promote an energy transition.  

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