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Natural Gas Market Indicators

Chris McGill — Wed, 14 Mar 2012 18:38:37 +0000

The Henry Hub Spot Price for Natural Gas today is $2.15 per MMBtu. Strong domestic supplies and modest demand, of course, are the principal reasons why acquisition prices remain low. With that said, market fundamentals on the supply side, particularly the decline in gas-directed rig counts, appear to be influencing some analytical outlooks, which now point to strengthening Henry Hub prices as the year moves forward. However, to place the outlooks in context, strengthening prices mean averages that may push closer to $3.00 per MMBtu by year-end 2012 and perhaps $3.50 in 2013, reflecting a continued trend toward relative price stability for the near-term.

Without repeating what has been said over and over during the past several months regarding prevailing natural gas market conditions, perhaps the two most watched industry metrics for the coming months will be the pace at which domestic natural gas production responds to the market balancing influence of reduced gas-directed rig activity and the continued momentum associated with natural gas’ capture (from coal) of base and incremental power generation requirements this summer. Flat or decreasing domestic production should lead to pricing increases at the wellhead if summer cooling loads so influence the market. On the other hand, the relatively high level of working gas in storage at season’s end means less will be necessary for daily injections and this could have a moderating impact on price rationalization in an adjusting market.

Visit this link to download the full Natural Gas Market Indicators. Topics covered include: weather, working gas in underground storage, natural gas production, shale gas, rig counts, pipeline imports and exports, LNG markets, and a summary of the natural gas market.

AGA will hold conference call for any interested reader of the Natural Gas Market Indicators on Monday April 2, 2012 from 2:00-3:00pm eastern time to discuss the post 2011-2012 winter heating season. The call can be accessed by dialing 832-431-3335, participant code 9071373#.

The March 30, 2012 Natural Gas Market Indicators will be reviewed briefly, then the conference will be opened to any questions callers may have regarding the report or other natural gas topics. AGA’s Policy and Analysis staff will host the call, and related questions or discussion. Please take this opportunity to interact with NGMI content developers and other key AGA staff members.

Natural Gas Market Indicators

Chris McGill — Wed, 29 Feb 2012 15:34:56 +0000

Mild temperatures have trumped all other market conditions this winter, even with a flattening of production growth for the first time in five years. Short-term gas demand for residential and commercial heating has lessened and gas-to-power burn has dropped from the higher volumes seen in mid-February. Ratcheting requirements could still pull more gas from storage into a market that is already awash in supply, but the demand equation, and ultimately supply-demand balance in the market, will be a function of how quickly winter recedes and spring arrives.

Visit this link to download the full Natural Gas Market Indicators . Topics covered include: Reported Prices, Weather, Working Gas in Underground Storage, Shale Gas, Rig Counts, Pipeline Imports and Exports, and LNG Markets.

Natural Gas Market Indicators

Chris McGill — Fri, 27 Jan 2012 15:17:37 +0000

This shouldn’t take too long. Natural gas acquisition prices are low. Storage inventories are bursting at the seams for this time of year and “must turn” requirements for some volumes of storage may put additional downward pressure on prices.

Warm weather for the country as a whole has completely trumped any market pressure on pricing that may have developed this winter given reductions in gas-directed drilling.

More natural gas may displace coal in power generation in the short-term and market changes will come, eventually. However, little is expected to change for the balance of the winter heating season unless there is an extraordinary cold weather event.

Visit this link to download the full Natural Gas Market Indicators .Topics covered include: Reported Prices, Weather, Working Gas in Underground Storage, Natural Gas Production, Rig Counts, Pipeline Imports and Exports, and LNG Markets.

Natural Gas Market Indicators

Chris McGill — Fri, 13 Jan 2012 19:48:14 +0000

While many analysts do not expect to see 2012 year-over-year production growth on the scale seen in 2011, most do not expect a precipitous decline in domestic production either. Slowing gas-directed rig counts are one possible indicator of the future flattening of U.S. gas production growth, however, many analysts point to rig, well and completion efficiency improvements along with an inventory of wells yet to be hooked up as a countering market force.

Indeed, pricing pressure today as a result of market forces means starting at a baseline of $3 per MMBtu. A 50 percent increase in average acquisition prices would only result in a baseline that many analysts believe is ultimately necessary to sustain the long-term health of U.S. gas production.

Perhaps the key to this puzzle is not rig counts but demand for natural gas. Realizing the full potential of North American natural gas energy may not occur until it is actually demanded.

Natural Gas Market Indicators

Chris McGill — Fri, 30 Dec 2011 18:30:19 +0000

As the year closed, the natural gas market could not find a reason to impose a significant price spike on what had been very low gas acquisition costs (near $3.00 per MMBtu at Henry Hub for much of December.

However, strong supply and relatively mild temperatures in many parts of the nation have cooperated to only impose subtle influences on price movements in the face of the 2011-12 winter heating season. Quantifying that relationship, domestic production in 2011 has risen 7.4 percent year-over-year from 2010, reflecting additional gas produced from shale formations and sold into market.

However, year-to-date demand was up only 1.2 percent over last year led primarily by increased gas supplied to power generators.

Natural Gas Market Indicators

Chris McGill — Thu, 15 Dec 2011 20:45:04 +0000

As the year nears its close, the remarkable fact to look back upon is that shale gas development has reshaped the nation’s supply environment. Domestic production has risen 2.1 percent year-over-year, growth reflecting additional gas produced from shale formations and sold into market.

The resulting boon of domestic gas has reduced average imports via pipeline from Canada and LNG re-gasification terminals, both of which have decreased in volume year over year. We also see strong gas-in-storage volumes entering the winter season, with working gas reaching a record peak for a second year in a row.

At the same time, demand has increased 2.6 percent year-overyear as more gas was burned for power generation, utilized in the residential and commercial sector, and exported to Mexico. This balance has created a softer price environment with spot and near-month futures contracts trading in the low-to-mid $3 range in mid-December.

The fact is that the national supply portfolio is strong and consumers benefit. With that said, attention and concern to gas production, and in particular shale gas development, remain. This week additional public attention has been brought to hydraulic fracturing practices and drinking water quality in locations such as Wyoming, but the statements from the Environmental Protection Agency public are being strongly refuted by industry sources.

Time and additional scrutiny of the science will resolve the differences.

Natural Gas Market Indicators

Chris McGill — Wed, 30 Nov 2011 19:59:39 +0000

The current market summary for natural gas is fairly straight forward and reflects the events of the past year. Domestic production is growing and even though U.S. consumption of natural gas is up slightly (about 2.5 percent) due primarily to gas to power generation and seasonal heating loads in early 2011, prices are down.

The national working gas inventory is at record levels and the winter heating season has started warm. Each critical factor seems to point to a reliable, affordable natural gas short-term for winter heating season customers. Now we will wait for Mother Nature to dictate the final variable.

Natural Gas Market Indicators

Chris McGill — Tue, 15 Nov 2011 23:37:19 +0000

A cold week in early November especially for the South, Northeast and West has put the country on notice for the coming winter heating season. With that said, the general mood is very positive for reliability and pricing this winter heating season: natural gas dry production is at record levels, even though more drilling resources are being directed toward oil; storage levels entering the winter heating season will likely peak at more than 3.8 Tcf in 2011 – settling at or above record levels; and yes, while pipeline imports and LNG sendout are down year-over-year, sufficient available capacity remains to meet a weather-driven spike in demand (constraints on transportation infrastructure notwithstanding).

All of this indicates a robust supply picture going forward, even with total natural gas demand about 2.8 percent ahead of last year at this time. On the flip side of the supply coin, domestic production increases have flattened forward price curves, which may dampen new storage construction as investors normally rely upon sufficient seasonal price spreads to signal market and arbitrage opportunities. This trend is likely to develop over the longerterm,to be sure, but as has been said so many times before: it’s always something.

Natural Gas Market Indicators

Chris McGill — Fri, 28 Oct 2011 20:39:56 +0000

Natural gas consumers in the United States have been told to expect relatively stable natural gas costs (dependent on weather of course) and reliable supplies for the coming winter heating season. The proof is in the numbers: large underground storage volumes, record domestic production, and adequate access to pipeline and LNG imports when necessary.

So where are the flaws? Actually, they are very hard to identify, particularly in the short-term. The longer-term may see additional environmental requirements associated with production facilities or challenges to the economy or even continued rebalancing of investment dollars in oil and liquids plays rather than dry natural gas.

However, the argument can be made that even these issues are only a natural process of establishing economic equilibrium rather than a genuine attack on the viability of a balanced stable outlook for natural gas in our economy.

Natural Gas Market Indicators

Chris McGill — Fri, 14 Oct 2011 18:47:25 +0000

Natural gas spot and futures market prices have turned toward the downside the past two weeks, driven in part by mild weather that has led to soft demand, a fact reflected in demand volumes in the low 50 Bcf per day range, currently only slightly above last year’s volumes. Meanwhile, production remains elevated and consistently strong, so near-record volumes of gas directed into storage are now above the five-year average and close to the all time record set last year.

The range of market indicators suggest an environment that will be able to supply adequatevolumes of gas to meet demand this winter heating season. This trajectory could change, certainly, as major events such as gulf-related supply disruptions are possible as the hurricane season is not officially closed yet (although no tropical storms or hurricanes are currently identified in the Atlantic). That said, the fundamentals point to a strong domestic supply position as we head into higher demand winter months.