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Good morning; here's what the Oilman has for you today:

• Wind Stops Blowing in Texas, Natgas Shines

• It’s Starting: Gas Drillers Begin Cutting Output

• Tweet of the Day

Wind Stops Blowing in Texas, Natgas Shines

Wind power output in Texas last month dropped by 22% from a year earlier.

Because the wind wasn’t blowing as much.

So utilities had to crank up the gas-powered plants.

There were no blackouts.

The evidence is piling up

Texas is the biggest wind power market in the United States.

In fact, wind is the second-largest source of electricity in Texas.

And some hope to make it the largest.

But not just yet.

The 22% output drop adds to a growing body of evidence.

And that evidence shows that no grid can go 100% renewable.

Unless you include hydro and nuclear in the renewable definition, that is.

But wait, it gets worse.

For the full year of 2023, total wind power output in Texas rose by 2.4% from 2022.

Over the same period, wind generation capacity grew by… 3%.

So, capacity rose more than actual output.

How about that for reliable energy?

Hydrocarbons remain unbeatable

It’s an idea that probably gives wind and solar developers nightmares.

But the Texas developments are proof that gas and, in this case, coal always win.

Because they are always there, on demand.

As long as ERCOT doesn’t turn off the power supply to production sites, that is.

Which is what it did back in 2021, resulting in freezes and gas shortages.

A green grid sounds great.

But a green grid will be an unreliable grid.

And I bet most of us would take reliable over green any day.

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It’s Starting: Gas Drillers Begin Cutting Output

Natural gas prices this month slipped below $2 per mmBtu.

Gas drillers are responding with plans for rig and completion crew cuts.

The boom that couldn’t last forever

For over a year now, U.S. natgas prices have been stuck below $3 per mmBtu.

Weaker demand at home has been one reason.

Europe’s inflation woes have been another.

But producers kept pumping like there’s no tomorrow.

Now, they’re feeling the pinch and are retreating.

In their latest financial report, several gas heavyweights said they planned to cut rigs.

They also said they’d curb spending on more output.

Those wondering how long drillers could survive on sub-breakeven gas prices got their answer.

A reminder of how the free market works

The output boom of the last two years was a response to a surge in overseas demand.

Specifically, it was a response to the surge in European demand.

That led to an equal surge in U.S. LNG exports, feeding demand optimism among gas producers.

However, the Europeans eventually realized the price tag for that gas was quite high.

Consumption dropped, even as LNG imports continued high.

The outlook for future demand darkened.

Prices dropped, falling below $2 per mmBtu this month.

And the Biden pause on new LNG capacity didn’t help either.

It’s funny, though.

One reason for that pause was concern about higher local prices.

Which we will get now because drillers can’t turn in a profit at current prices.

It’s how the free market works. You can’t pause that.

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