$2 Natural Gas? | Russell T. Rudy Energy LLC
“World Oil” reports that an oversupply of natural gas, in conjunction with unseasonably warm weather, is driving natural gas prices toward $2 per Million British Thermal units. Prices have not been this low since April of 2012.
Tim Evans, energy analyst at Citi Futures Perspective, observed that at these prices investment, drilling and production will all be reduced. He went on to say that “In terms of the big picture, boom-or-bust cycle, we are in the bust phase.”
Since advances in hydraulic fracturing and horizontal drilling enabled the shale revolution, gas production has outstripped demand. This led to a run-up in gas inventories which are about to reach almost 4 trillion cubic feet according to the Energy Information Administration. Supplies have not been at this level since 2006. In response, both Goldman Sachs and Bank of America have cut their short-term gas price forecasts.
AccuWeather Inc. predicts that on November 5, temperatures will be 11 and 6 degrees above normal in Manhattan and Chicago respectively. About 49% of American households use natural gas for heating, but these are largely in the Northeast and Midwest.
Citi’s Evans concludes that “The lower we go, the more of a bargain it represents and the less sustainable the price becomes.”
To read the article in its entirety, please go to http://www.worldoil.com/news/2015/10/27/us-natural-gas-heads-toward-2-as-stockpiles-near-record .
