NATURAL GAS PRICES TUMBLE TO 52-WEEK LOW
By CHRIS KAHN
The Associated Press
Thursday, October 21, 2010;
12:27 PM
NEW YORK -- Natural gas prices on Thursday slipped to a new low for the year after the government reported that U.S. supplies grew more than expected last week. The Energy Information Administration said the natural gas held in underground storage expanded by 93 billion cubic feet last week. Analysts expected an increase of between 86 and 90 billion cubic feet, according to Platts, the energy information arm of McGraw-Hill Cos. Natural gas futures tumbled shortly after the report, dropping to a new 52-week low of $3.372 per 1,000 cubic feet on the New York Mercantile Exchange. In midday trading natural gas was down 15.8 cents, or 4.5 percent, at $3.381 per 1,000 cubic feet. Unlike oil, natural gas hasn't seen a big rebound in prices this year, in part because of the hefty storage levels. Petroleum companies also have aggressively expanded drilling operations in America's vast shale formations, producing more natural gas at a time when supplies are already high. Prices probably will continue to slide toward the end of the year, benefiting homeowners who use natural gas for heat and utilities that generate electricity with it, analyst and trader Stephen Schork said. Natural gas prices tend to rise as the weather chills and people crank up the heat. "The rally usually starts right about now, but it's not coming," Schork said. "There's a lot of gas already in the ground, there's no significant weather out there, and the economy is still struggling." The EIA report said that the U.S. had 3.68 trillion cubic feet of natural gas in underground storage last week. That's 1.3 percent less than last year's supply, but 8.4 percent higher than the five-year average.
Benchmark crude for December delivery also gave up $1.57 at $80.97 a barrel on the Nymex. In London, Brent crude dropped $1.12 to $82.48 a barrel on the ICE Futures exchange.
Meanwhile, retail gasoline prices held steady at $2.831 a gallon, according to AAA, Wright Express and Oil Price Information Service. A gallon of regular is 11 cents more expensive than a month ago and 23.5 cents higher than a year ago. In other Nymex trading in November contracts, heating oil fell 2.64 cents to $2.2284 a gallon and gasoline dropped 2.64 cents to $2.0562 a gallon.
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Replies to This Discussion
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Permalink Reply by Methuselah on -
If they're stockpiling NG and driving down the price, that's what our royalties are based on. When the need goes up, they can escalate the price and sell for quite a profit based on what they paid us, the mineral right holders. Is this assumption correct or do I just need to go back to bed?
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Permalink Reply by Jack Blake on
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They're finding gas everywhere in the world both conventional and unconventional. Gas will not top $5/mcf within the next two years...............
I know it sucks but I speak the truth.
JB
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Permalink Reply by Jack Blake on
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In the HS they would have already stopped if they didn't have to get all these leases HBP.
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Permalink Reply by young land owner on
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U know what really suckes, is that we would be making so much more money if gas was normal. $ Trust me I know what a blessing this is but its pretty clear we will miss the BUS on the big bucks. Yea it will go back up but thats when our gas production will trickel, already have declined 80%.. My well that I get checks on have declined from 400 mcf per month to like 120-160, 8 months producing. Another well that is waiting on state potential will come in at worst time.. To put the icing on the cake we are supposed to have mild, mild winter.
ylo
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Permalink Reply by Frank on
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YLO,
I hear a lot of choke backs are on wells in the HS now due to the glut. HBP goals keep the bits turning in open units. Gas spiked up to about $15 after Katrina and Rita. A long term trend may not make $3.50 gas look so bad. The underground ballon will deflate if we take more out than goes in. This should be a 50+ year play in total, so I think landowners will reap much more than the $1200 per acre pasture land they had. They will have nice new orange tractors on top of it for a while as well. Buy Kubota stock should probably be recommended in Louisiana for the past couple of years. I think they will do well going forward after this economic slump.
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Permalink Reply by MARG on
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Young Land Owner and Frank, gas was that super high after Katenina and Rita; however, one was not a true winner at that seems one would be. I had a new well or two and they were pumped and pumped (seemed like to me--too busy at time to read stubs much, etc. and keep up with as I usually do and as we all should do. ) See when they sell a lot for you and you get the big bucks the IRS WAS RIGHT THERE TO GET IT. I do not like to be negative, but it is either too low or too high. For the last five years, I have wanted to hit an average year in order not to be taxed so much yet get enough to have it balanced. We hate to be seeing it given away now. Moreover, my utilities are much higher than the
y have been previously. Seems we would get a break on those during these" low energyfor us" days. Seems profit is there for some. THANKS FOR THE DISCUSSION, SKIP.
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Permalink Reply by Skip Peel - Mineral Consultant on
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IMO, the days of wide price flucuations are history. As the economy recovers and more end users convert to nat gas, the price will rebound. I think it will settle in a relatively narrow range however and never approach double digits again in my lifetime. I think consumers, producers and royalty interests would all be well served in a range of $6 to $7.50. It may take 3 to 4 years to get there.
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Permalink Reply by Jack Blake on
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Skip,
You seem to know more about all of this than the majority of us. I sure hope you are right about the $6-$7.50 range in the next 3-4 years. That would be a heck of a lot better that where we are at now.
JB
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