What Gas Surplus? | Russell T. Rudy Energy LLC
In a recent post on “Oil Voice”, securities analyst Keith Schaefer predicts higher natural gas prices, sooner rather than later, and presents his rationale.
In March we had a gas glut. Inventories were over one trillion cubic feet per day (tcf). Prices reacted and remained much lower than originally expected. However, for the last 21 weeks, additions to inventory have risen at half the normal seasonal rate. Meanwhile, consumption has been greater than expected, especially in August and September. We have used much more gas since the Spring than anyone expected. Consequently, the huge natural gas surplus is vanishing quickly.
We currently have only 69 billion cubic feet (bcf) of gas in storage. While it varies seasonally, we use about 70 BCF per day. This means that we have gone from a massive oversupply to just one day’s demand in inventory.
As the gas glut is vanishing, the prospect of increasing demand is on the horizon as well. Last winter, the densely populated east coast experienced a very warm winter. This winter is expected to be much colder. A bitterly cold day can increase gas consumption by an additional 10 bcf per day.
All of this leads one to ask, “What is being done to replenish inventories?” The answer is “Not much”. While production can be increased in the short term, the long term solution is drilling. Currently, only 92 rigs are drilling for gas, down 94% from its peak and 50% from a year ago.
What will incent operators to increase their efforts to boost drilling and production is higher prices. Apparently, this is already happening. The recent price was 3.23 per million British thermal units (MMBTU), an increase of over 15% since mid-August. We can only hope that the trend continues.
To read the article in its entirety, please go to http://www.oilvoice.com/n/There-is-Less-Than-ONE-Days-Surplus-of-Natural-Gas/1ee6ae0cda24.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.
