Natural Gas Price Recovery | Russell T. Rudy Energy LLC
Keith Schoefer’s recent post on “OilVoice.com” asks; “Is There A Perfect Storm Coming for Natural Gas Prices?”. While this article is written from a stock analyst’s perspective, the analysis of gas markets and prices is relevant for all of us who follow the energy industry.
Schoefer points out that while gas market fundamentals are currently weak (1 trillion cubic feet excess inventory compared to the same point last year), the stock market seems to be bullish on energy companies with production skewed toward natural gas. The author attributes this to the market’s tendency to look 6-9 months into the future rather than at present conditions.
So far this year, natural gas production is flat. This is a stark contrast to the last two years when output surged by 4-5 billion cubic feet per day (bcfd). Further, over the last few years, demand has tended to increase as well, just not as sharply as supply.
As everyone knows, the weather plays a huge role in natural gas demand, and consequently, prices. This summer is expected to be hot, very hot, similar to 2012. That year, prices doubled from April to December. A similar summer could increase demand this year by 3-4 bcfd.
While hot summers are good for natural gas demand and prices, cold winters are even better. The National Oceanic and Atmospheric Administration’s Climate Prediction Center recently forecast a good chance of a La Nina weather system for next winter. This could increase demand by up to 10 bcfd from November to March.
Just a 4 bcfd increase in demand for 150 days this summer would cut the current 1 trillion cubic feet surplus in half. This, in conjunction with a cold winter, could mean good times for natural gas producers.
To read the article (which includes some helpful graphics) in its entirety please go to http://www.oilvoice.com/n/Is-There-A-Perfect-Storm-Coming-for-Natural-Gas-Prices/ed3a2add2306.aspx .
Russell T. Rudy Energy, LLC buys oil, gas and mineral interests nationwide. Please call (800-880-0940), or write (info@rudyenergy.com ) to let us know if you agree, disagree or would just like to comment on this, or any of our posts.
