Posted on 07/29/2017 8:15:29 AM PDT by Lorianne
After rising in mid-May to $3.424 per million British thermal units on the New York Mercantile Exchange, natural-gas futures promptly fell to $3. They’ve hardly budged since.
Prices for the heating and power-generating fuel have traded within about 5% of $3 since the start of June, and many expect that to persist. On Friday, futures settled at $2.941.
Goldman Sachs Group forecasts an average price of $3 for the next 12 months. Barclays this week trimmed its price forecasts for this year to $3.03, and for 2018, to $3.10. Citigroup makes a case for prices to average $3.20 this year before falling back to $3 next year and in 2019.
The bull case—or at least the argument against prices plunging below $2, like they did in each of the past two years—rests on the fact that the market has been undersupplied this year, reducing gas in storage to 9.2% below last year’s levels.
Many analysts believe that the U.S. is on pace to start the winter heating season with the lowest stockpiles since 2014. The undersupply stems from low prices earlier this year, which discouraged drilling, and stretches of hotter-than-normal weather this summer that pumped up power demand from air conditioners.
Bears point to the flood of gas flowing from West Texas, where it is a byproduct of the region’s frenzied oil drilling and is relatively unresponsive to gas prices, as well as the many Appalachian wells that have been drilled in anticipation of new pipelines.
(Excerpt) Read more at barrons.com ...
Very interesting.
We’re getting well over that price for our gas, this area the gas is high in liquids.
The Haynesville Shale area is being drilled again and this area has no liquid other than salt water, very prolific in gas only, prices even at 3 dollars probably will still go down to around 2.50 to 2.250
For the first time I've seen the contract price was below the monthly price I'm paying so I dived in.
I’m billed in “therms” so one million BTUs is about 10 therms.
Fourth attempt to post from my phone. I trade natural gas quite a bit. I do not use Futures they can certainly rip your head off. I use an ETF known as down gas symbol dgaz. It can also move fairly violently. It is my opinion that the run-up in natural gas to 3.25 was rather unusual and I would be very surprised to see $4 Natural Gas. I don’t think we’ll ever see $6 natural gas again and natural gas. I short rallies... I do not bet on ramps
Would the exporting of natural gas help the price go up?
Well, one would think. There are two separate dynamics at work.
One is: The sheer volume of /NG produced (we speculators use the slash in front of the symbol) is simply gargantuan and the amounts carried in carrier ships are to me, small. Tiny. After all, you need a highly specialized ship and a complex terminal to transmit the gas from land to sea. These are both hundred million or billion dollar affairs. Oh yes, they will be built, and this absolutely without question opens up new markets for /NG.
But two is: /NG is $12 in Japan. It is more like $8+ in Europe.
So, the purpose of transporting /NG via ship & terminal is to get gas to markets where the commodity itself is massively more valuable. There is no question whatsoever that if you can buy /NG for $3 in the US and sell it for $8 or $10 or $12 elsewhere, there’s plenty of profit to be made and clearly there would not be these massive infrastructure builds being done if the people behind them did not see those profits. Perfectly valid and very juicy basis for investment.
But to me, the amounts of /NG transportable by these means using all the capacity they have now or will have over the next few years is likely to have a miniscule effect on the DOMESTIC price of /NG because (again, in my opinion) whatever drawdowns may occur from exports will have no perceivable effect on domestic supplies.
That is why I believe there is no great upside to /NG prices, at least as measured domestically. Virtually any hole drilled in the ground yields /NG, and with all the fracking going on, there are megatons of it. A year or more ago, there was a big issue with producers being able to get /NG to market, because there were no pipelines where new projects were being dug. This was/is called “stranded” /NG. Indeed, producers were having to flare (burn) their /NG because they simply had no place to put it as it came up “for free” in their projects. And there was environment consternation as to how much burning was going on. But the producers have become more “skilled” at getting product to market. The valuable liquids that come up with /NG and their value has helped. (The takeaway is that you can have a valuable commodity on your hands but if you cannot get it to market, you can’t sell it and cannot realize the apparent value)
So bottom line, exporters will make tremendous money from exporting /NG, provided they can finance the huge costs of the transportation pieces. But all they can “ever” hope to export by these means should have almost zero impact on domestic supply & demand. Again, IMO.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.