By Ben Casselman
After months of energy executives cutting their domestic gas drilling, only to watch natural gas production saunter along and prices continue to hang out in the cellar, the gas bulls finally have something to cheer about.


Associated Press
Blue flame blues? The U.S. government is out with its latest natural-gas production report and gas production in the Lower 48 states fell by 1.4 billion cubic feet a day in September compared to August.

The data, which comes from the Energy Information Administration, suggest that the sharp drop in U.S. drilling activity is finally starting to result in lower production. That, in turn, could ease the glut of gas that has kept prices under $5 per million British thermal units.

This is a dollop of good news for companies like Chesapeake Energy and Devon Energy. Ironically, they have been betting on a turnaround in gas prices to justify (and pay for) increased drilling.

The news isn’t all bullish. September production fell by so much in part because the EIA revised upward its estimate of how much gas was produced in August. And production is up a whopping 11.6% from last September, although last year’s figure was unusually low because hurricanes Gustav and Ike knocked out production in the Gulf of Mexico.

Speaking of hurricanes, the 2009 hurricane season officially ends today, though you’d be forgiven for forgetting it ever began. This season had the fewest named storms (nine) since 1997, and for the first time in three years, not a single hurricane hit the U.S. mainland.

Note to gas bears: it ain’t all bad.

The quiet hurricane season helps explain why the U.S. has record amounts of natural gas in storage heading into the winter heating season. So does the unusually mild weather so far this November. If the warm weather continues, no amount of reduced production is going to bring the gas market back into balance.

Still, the bulls can breathe a sigh of relief—and they surely are. Analysts at Tudor Pickering Holt & Co., for example, had all but staked their reputations on the EIA announcing a production decline of at least 1 billion cubic feet a day. They got that.

Now all eyes will be on the October report, due out Dec. 29.