The recent increase in natural gas prices has some analysts pointing to a turnaround in fundamentals. However, the last three times that Henry Hub prices experienced a mini-rally (early to mid-May and for a week each in early and late June), those price increases were followed by sharp weakness. It is impossible to be certain, but some analysts suggest that this increase may be different.
While two weeks hardly constitutes a trend, slight declines in production may be an early indication of the ever and oft-promised supply response to low prices we have been hearing about all summer. We are also curious to see how long it takes the recent increase in drilling activity to hit production.
Will new drilling translate into new production before last year’s rig count collapse lowers supply precipitously, or will gas prices resume their cyclical, commodity boom-bust cycle? Only time will tell.
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