Friday, August 14, 2009

Will bearish gas market come back this year?

The North American gas market is suffering from oversupply and waning demand that have combined to keep natural gas prices low. Yet, despite this, there are several indications that prices may rally, although there is no consensus on this.

Crude oil prices have been hovering around $70 for some time, and at least one senior analyst, Darin Newsom with DTN, a market information service out of Omaha, Neb., says that oil may hit $90 before year-end.

Newsome added that even though oil has the potential to rise another $20, supply and demand fundamentals remain weak.

The EIA recently reported record-high gas storage. That, combined with robust production mainly from unconventional resource plays, will continue to depress the price of natural gas, the agency said.

In its August short-term energy outlook, the EIA projected a full-year average price of $3.92/MMBtu – a full 30 cents less than its previous forecast.

However, as the economy bounces back and the supply-and-demand dynamic starts to balance, the EIA expects the Henry Hub price to rise to an average of $5.48/Mcf next year.

The EIA said it expects storage inventories to set a record by the end of the injection season, reaching 3.8 tcf by the end of October, topping the record set in 2007 by 235 bcf.

Canada’s National Energy Board attributes current low gas prices to an expanded US natural gas pipeline network, higher LNG imports, and sluggish gas demand. The NEB says the low prices have put pressure on drilling activity since late last year, with Canadian drilling down about 60% and US activity down roughly 50%.

The NEB said it expects gas prices to hold at or below the $4/MMBtu level for the next few weeks at least.

What are your thoughts on natural gas prices and when you think the market will improve?

8 Comments:

Anonymous Anonymous said...

We have already seen $2.80 MMBTU recently. At least one new LNG receiving terminal is coming online in N America in the next couple months. We could max out on the injection fill this year whioch could trigger shut-ins in some regions. Barring a hurricane that modeartely affects the GOM I believe it is possible that we could see a $2.25-$2.40/MMBTU by the end of September. Even if we see that it should be short lived as the cooler weather kicks in.

Let's hope for an early cold fall!

August 30, 2009 at 3:52 PM  
Anonymous betty said...

Great site!!! Check it out-Google CEO Schmidt says punching down into the earth to capture natural and clean geothermal energy could help move the United States away from it's dependence on petroleum-Dec.16,2008-Betty http://www.geothermalquestions.net

September 16, 2009 at 12:06 PM  
Anonymous Anonymous said...

U.S. politics are going to play a factor in natural gas prices in medium and long term. If current administration weakens and fails to push thru any kind of meaningful cap and trade legislation, the recovery in gas prices will not be robust. However, if legislation passes that makes coal less attractive, we’ll see additional natural gas power generation and associated capital investment. We could see upside beyond current futures trading levels, regardless of the LNG regasification terminals that have come on line.

September 23, 2009 at 6:43 AM  
Anonymous Anonymous said...

I don't know. Niether does the EIA.
By the way, why are taxpayers paying the govt to set up a crystal ball department? oh, I forgot, under the new rules, the govt is running everything.

September 23, 2009 at 8:47 AM  
Anonymous Anonymous said...

Coal prices are generally higher than they were this summer... I hope (but I don't know) that lower natural gas prices lead to more use of gas in electric generation. In a sluggish economy that is going to get worse before it gets better (thanks to the liberals in charge) that appears to me to be our only chance of keeping gas prices out of the toilet.

March 2, 2010 at 5:11 AM  
Blogger Paul said...

From atop the Marcellus ... (Disclosure: I'm an individual investor in natural gas-related companies.) "Hydraulic fracturing is safe," is one of the repeated talking points of the natgas producers. Another is, "Imposing EPA restrictions will cause an unnecessary financial burden on exploration and production." Hey, here's a news flash: Repeating the talking points doesn't change reality. Unless the natural gas boosters want to drive the country toward using armed eminent domain to secure these resources, it would be wise to look at the facts. Instead of resisting and denying, why not create the Bell Labs of natural gas? Let's get real science to solve these solvable problems. If the natural gas industry doesn't embrace its responsibility, at best we can expect further delays and regulation.

March 16, 2010 at 10:07 AM  
Blogger Not1Not2 said...

Qatar and Russia have agreed to limit supply so LNG will be limited. Coal prices will support HH close to $5 per MMBtu. The key is weather and hurricanes but production is growing very rapidly and will continue to do so with the growth in horizontal rigs. So depending on weather, there is a great deal of potential for a return to a soft market. The big question is timing.

June 22, 2010 at 5:41 AM  
Blogger Not1Not2 said...

Natural gas production has been growing at close to 1% per month through July and the horizontal rig count sets new records each month. We predicted $4.75 for 2011 last month when Henry Hub was at $5.30 and we think $4 is very possible next year.

Ron Denhardt
VP EnergySeer.com

August 10, 2010 at 4:01 PM  

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8 Comments:
Anonymous Anonymous said...
We have already seen $2.80 MMBTU recently. At least one new LNG receiving terminal is coming online in N America in the next couple months. We could max out on the injection fill this year whioch could trigger shut-ins in some regions. Barring a hurricane that modeartely affects the GOM I believe it is possible that we could see a $2.25-$2.40/MMBTU by the end of September. Even if we see that it should be short lived as the cooler weather kicks in.

Let's hope for an early cold fall!
August 30, 2009 at 3:52 PM  

*/ ?>
Anonymous betty said...
Great site!!! Check it out-Google CEO Schmidt says punching down into the earth to capture natural and clean geothermal energy could help move the United States away from it's dependence on petroleum-Dec.16,2008-Betty http://www.geothermalquestions.net
September 16, 2009 at 12:06 PM  

*/ ?>
Anonymous Anonymous said...
U.S. politics are going to play a factor in natural gas prices in medium and long term. If current administration weakens and fails to push thru any kind of meaningful cap and trade legislation, the recovery in gas prices will not be robust. However, if legislation passes that makes coal less attractive, we’ll see additional natural gas power generation and associated capital investment. We could see upside beyond current futures trading levels, regardless of the LNG regasification terminals that have come on line.
September 23, 2009 at 6:43 AM  

*/ ?>
Anonymous Anonymous said...
I don't know. Niether does the EIA.
By the way, why are taxpayers paying the govt to set up a crystal ball department? oh, I forgot, under the new rules, the govt is running everything.
September 23, 2009 at 8:47 AM  

*/ ?>
Anonymous Anonymous said...
Coal prices are generally higher than they were this summer... I hope (but I don't know) that lower natural gas prices lead to more use of gas in electric generation. In a sluggish economy that is going to get worse before it gets better (thanks to the liberals in charge) that appears to me to be our only chance of keeping gas prices out of the toilet.
March 2, 2010 at 5:11 AM  

*/ ?>
Blogger Paul said...
From atop the Marcellus ... (Disclosure: I'm an individual investor in natural gas-related companies.) "Hydraulic fracturing is safe," is one of the repeated talking points of the natgas producers. Another is, "Imposing EPA restrictions will cause an unnecessary financial burden on exploration and production." Hey, here's a news flash: Repeating the talking points doesn't change reality. Unless the natural gas boosters want to drive the country toward using armed eminent domain to secure these resources, it would be wise to look at the facts. Instead of resisting and denying, why not create the Bell Labs of natural gas? Let's get real science to solve these solvable problems. If the natural gas industry doesn't embrace its responsibility, at best we can expect further delays and regulation.
March 16, 2010 at 10:07 AM  

*/ ?>
Blogger Not1Not2 said...
Qatar and Russia have agreed to limit supply so LNG will be limited. Coal prices will support HH close to $5 per MMBtu. The key is weather and hurricanes but production is growing very rapidly and will continue to do so with the growth in horizontal rigs. So depending on weather, there is a great deal of potential for a return to a soft market. The big question is timing.
June 22, 2010 at 5:41 AM  

*/ ?>
Blogger Not1Not2 said...
Natural gas production has been growing at close to 1% per month through July and the horizontal rig count sets new records each month. We predicted $4.75 for 2011 last month when Henry Hub was at $5.30 and we think $4 is very possible next year.

Ron Denhardt
VP EnergySeer.com
August 10, 2010 at 4:01 PM  

*/ ?>
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