U.S. natural gas producers are pumping huge volumes of the fuel into a market about to have its fill - an event that could push gas prices even lower and create pain across the industry.

Companies such as Anadarko Petroleum Corp. (APC), Chesapeake Energy Corp. (CHK) and Devon Energy Corp. (DVN) have seen their production soar from year-ago levels - at a time when natural gas stocks are on pace to fill storage by this fall. As storage levels move closer to capacity, some producers could be forced to curtail output. And prices - which are already down more than 70% from last year's peak above $13 a million British thermal units - could fall even further.

The situation underscores how the natural gas industry is changing, thanks to vast new gas supplies trapped in dense rock formations known as shales. New technology has allowed producers to increase output from these rocks even as the industry, as a whole, spends less on drilling. But a further slump in price may squeeze cash-strapped producers that are already struggling amid an economic downturn that has undermined energy demand.

Aubrey McClendon, chief executive of Chesapeake Energy said that there will be much "wailing and gnashing of teeth in the next 60 days" across the industry as storage fills.

But at the same time producers are turning in big results from natural gas fields that have cropped up around the country. And some producers aren't willing to hold back gas in order to defend prices.

"Pretty soon, everybody is going to start involuntarily curtailing gas so we don't see any reason to take it on the chin for the team any more than we did," McClendon said during a conference call. The company stopped curbing output in the second quarter, and saw a production increase of 5% from a year ago.

Devon, which boasted a 12% increase in second-quarter production versus last year, intends to temporarily curb output while storage is high - but the company is on an efficiency roll. The company boosted its production in North Texas' Barnett Shale to 1.2 billion cubic feet a day, and set a record in the quarter by finishing a well in nine days, a process that five years ago took two to three weeks to complete. By year's end, Devon's 2009 output is projected to increase by 3% from last year's levels.

"The strength of our overall portfolio continues to impress us," said Larry Nichols, Devon's chairman and chief executive, in an interview.

Phil Weiss, an analyst at Argus Research Co. in New York, said he was puzzled by companies' strategy to increase production in the face of rising storage levels.

"If it were my business, I wouldn't be running it that way," Weiss said.

But companies are counting on the diminishing cost of shale gas extraction in order to make it through the slump. Anadarko Petroleum, which saw its production jump 12% in the second quarter, said it would ramp up activity in the Marcellus Shale - a vast natural gas field stretching from West Virginia to New York - where the company can achieve a 10% rate of return at gas prices of $2.50 a million British thermal units.

The U.S. Energy Information Administration reported Thursday that gas in U.S. storage for the week ended July 31 stood at 3.089 trillion cubic feet - 23% higher than year-ago levels and 19% higher than the five-year average. Storage capacity is estimated at about 4 trillion cubic feet.

-By Jason Womack, Dow Jones Newswires; 713-547-9201; jason.womack@dowjones.com