Tag Archives: market indicators

Chris McGill Natural Gas Market Indicators

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.

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Richard Meyer Natural Gas Market Indicators

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.

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Chris McGill Natural Gas Market Indicators

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.

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Richard Meyer Natural Gas Market Indicators

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.

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