There are numerous unknowns as consumers of natural gas look forward in 2009 to conditions within the economy, energy prices and energy markets.
Let’s pick a few, speaking first to the demand side. Information on the real impact of recession in the economy is only now trickling in with respect to industrial consumption of natural gas. It appears that original estimates of consumption declines were conservative and that natural gas to large volume customers is declining more significantly than anticipated.
With that said, reductions in gas supply, particularly domestic production, will take months to adjust to current demand trends. In addition, many believe that North America will become a target for additional LNG sales this year simply because it may have no other place to go.
Strong supply and modest demand is a recipe for lower prices as winter ends and the summer power generation and storage injection season comes upon us. Nearly every indicator points in the direction noted above. So, if recent history is any judge something may be positioning itself to upset the apple cart. What might that be? Supply disruptions, policy decisions – time will tell.