January 23rd, 2012

Natural gas futures, the worst-performing commodity in 2012, rose the most in two years in New York after Chesapeake Energy Corp., the second-largest U.S. producer, said it will cut production and reduce spending.

Natural Gas futures climbed 7.8 percent after Chesapeake said it will “immediately curtail” output of 500 million cubic feet a day and lower planned investment in gas fields by 70 percent from 2011 levels to $900 million. Hedge funds and other large speculators last week cut bets that gas would fall as it traded at its lowest levels since 2002, a government report showed.

On the New York Mercantile Exchange, gas for February delivery rose 18.2 cents to settle at $2.525 per million British thermal units. The percentage increase was biggest since Dec. 10, 2009. The futures are down 16 percent this year.

Gross production at Chesapeake wells will be cut by as much as 1 billion cubic feet a day as gas-well completions are deferred wherever possible, the Oklahoma City-based company said in a statement today. The reduction equals about 1.5 percent of U.S. marketed gas output in 2011, Energy Department data show.

The company will idle half of its drilling rigs by the second quarter in fields that produce only gas, including Barnett Shale of Texas, the Marcellus Shale and the Haynesville Shale.

- Christine Buurma in New York at Bloomberg.