Despite rig counts that have fallen 55% since October, more cuts in gas production are needed this year to bring the market into balance, producers and analysts said Wednesday at GasMart in Chicago.

Overall gas production is still up 4% from last year even with production shut-ins to date as innovations in drilling technology and expansions in unconventional production have ameliorated expected production drop-offs, Bentek Energy President Porter Bennett said, adding that “many producers are drilling many more wells with fewer rigs.”

“The punch line is the supply is building, prices are going to remain low and you can expect to see more production shut-ins,” Bennett added. “We’re going to have to see more because that’s the only way to balance this. We’re going to have to shut down more production.”

ConocoPhillips Senior Vice President Will Hussey agreed, saying the market is “oversupplied and we’re just ramming it into storage. … Conventional gas is getting replaced by unconventional, by shale plays. That’s not anything new, but now you’re hearing it in a way that says it’s here, it’s happening.”

Nexen Marketing Managing Director of Eastern Marketing David Slater, concurred, saying “unconventional resources are producing more than expected … Almost all of the Rocky Mountains are showing growth, East Texas as well. A whole lot of wells that were drilled that couldn’t get out until the Midcontinent Express came on, and that pipeline has begun to fill up already.”

Looking ahead, Hussey advised: “Don’t take for granted this year – this winter – the things you’ve been able to count on in the past. You’ll be competing with a lot more people for gas, and the way the rig counts are coming down, there will be a lot less gas to compete for.”

Bennett agreed, suggesting that those elements will combine to have a longterm effect on basis prices. “When the economy gets going again, I think you’re going to see a vastly different supply stack,” he said, noting that by year’s end Rockies Express Pipeline should stretch from Wyoming to Clarington, Ohio. “All the pipelines that took gas out of REX into the Midwest are full. Where do you put the REX gas?”

reprinted with permission from Platts.