Skip to comments.Why Natural-Gas Prices Could Fade to Red
Posted on 03/29/2012 6:26:30 AM PDT by thackney
Traders like to exude an "I've-seen-this-movie-before" air of nonchalance. But the thriller unfolding in natural-gas marketscall it "Frackopalypse Now"has even the most jaded of them on the edge of their seats.
U.S. natural-gas prices are at a decade low, at about $2.20 a million British thermal units. That marks an unprecedented discount to crude oil. And next week heralds the start of "injection season," the time from April through October when warmer weather allows for rebuilding gas inventories.
This could make an already bad glut of gas far worse. The fear is that producers could be forced to actually give gas away.
Thursday's weekly report from the Energy Information Administration will likely show an earlier-than-normal start to the injection season, with an inventory build of about 50 billion cubic feet of gas, according to analysts' estimates. The mild winter and bountiful supply from the new production technique of hydrofracturing, or "fracking," shale formations has left inventory higher than ever for this time of year. April will kick off with inventories near 2.5 trillion cubic feet, 900 billion cubic feet above the five-year average.
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I work in the industry on the well completion end.
Nobody is too worried.
The real issue is a lack of infrastructure to move the NG from the wells into the distribution system.
With the number of NG power plants proposed, two ethane crackers and multiple power plant conversions (coal to NG), it might be a few years, but prices will rebound.
Absolutely, I don't mean to suggest otherwise.
But this year is going to be ugly for any smaller company that borrowed too heavy to jump on the Natural Gas production bandwagon.
What will it cost to convert all that gas into something usable like Algae?
‘give gas away’———
To which Country?
Sounds like a stock buying opportunity, at least the survivors...
I wonder if this has more to do with the mild winter, than over-production?
Also, I see more and more stories on coal power plants getting closed...which leads me to believe gas demand will grow.
We have an energy problem...if NG is cheap, people are going to find a way to use it.
The longer term issue is growing production. A good thing, but it was growing faster than could be supported. In the past year, drilling for Natural Gas has fallen off.
The mild wither meant less gas was taken out of storage. I think we likely will reach maximum storage capacity before winter demand grows above average production.
We will certainly use more of it. It is too cheap compared to many other energy sources. I don't believe we will build enough demand prior to this fall to reach the equilibrium prior to storage reaching capacity.
as one who is on the receiving end of that money ....please be right
I think we will see plenty of mergers/acquisitiona in the smaller nat gas companies this year.
Petrochemical industry takes note of shale bounty
It’s a lag now between plentiful supply and consumpton.
The per BTU cost of gas is like 25% of oil. That will be arbitraged away, slowly. Especially since gas is so clean, easily stored and distributed.