OK... I give up. What's the bottom price for natural gas and when will it hit. I read a lot of articles about the natural gas comeback... including the Haynesville. But the price keeps dropping and more flares are spotted by satellites. I'm thinking price will continue to drop through September unless the storage report shows we won't be meeting supply demands for winter. thanks, jhh.
You may have answered this before so forgive me if it is archived...
How should I compare the settlement price (NYMEX, Henry Hub etc.) to the price per mcf on my royalty check?
Joe, the monthly settlement is the best base priceto the best of my understanding but then there are variations depending on the sales hub and other discounts beyond my pay grade. Suggest you query jim weyland.
So where is the benefit we are supposed to receive for exporting NG? Wasn't that supposed to bring demand back and save us all??
What will be exported is LNG. And the first new exports of consequence will begin later this year or early in 2015. It will be several years after that before all the capacity will be on line. It's not going to save us all. It is going to improve prices, maybe ~15% over the 2014 average yearly price. Probably somewhere between $5 and $5.50/mcf. For the economy to get the full benefit of the new NG paradigm the price must be relatively stable and cost effective for end users. We want the chemical industry to use more NG and NGLs. We want electric utilities and merchant generators to switch to NG. We want CNG and LNG to be a cheaper alternative motor vehicle fuel.
Thanks Skip! I see that Mississippi is building combined coal and natural gas power plants. I know there is at least one in Meridian and it's considered clean due to the use of NG to burn off the coal waste. Anything like that planned for our area? Since we have both commodities wouldn't it make sense for us too?
I think the newest AEP power plant in Shreveport is dual cycle. I think that's the term. I am unaware of any new electrical generating facilities in the planning stage for NW LA at this time.
wiki description for combined/dual cycle gas fired power plant:
Skip, I think you are right in that it is the VOLATILITY of nat gas prices that keeps producers gun shy. It's hard to see demand expanding as long as the price fluctuates so much. Producers cannot predict their costs.
Oil & Coal are not nearly so volatile as NG - look at your 5 year chart from almost $6 to about $2. That is a much wider swing that oil or coal. A producer's costs could fluctuate wildly - and they don't like that.
the us/cme natural gas contract is traded throughout the world by specs. there's no other exchange traded contract for any commodity anywhere in the world that's as volatile as ol' natty.
and, last winter's early and strong onset of winter was a early christmas gift for producers giving them an opportunity to sell forward (hedge) at really good prices. as a producer, if you sell at high enough prices, the variable costs of drilling/production pretty much take care of themselves.
Monthly Settlement Price For August Contracts: $3.808 YTD Avg. Price: $4.628
Perspective is personal. Here is mine: The August settlement price is the highest August price since 2011. The Year To Date average price means that there is a reasonable possibility that 2014 could have the best yearly price average since 2008. This is remarkable considering the growing NG production from maturing domestic plays.
ohio.com August 1, 2014
The U.S. Department of Energy says the production of natural gas from Ohio’s Utica shale over its first 20 months is close to initial natural gas production from the highly touted Eagle Ford shale in Texas.
And Utica shale production is slightly more than Haynesville shale in Louisiana produced over its first 20 months, the agency’s Energy Information Administration said in a new assessment.
On the other hand, Utica production is not close to matching Marcellus shale in Pennsylvania and West Virginia for natural gas, the agency said. Marcellus was generating 3 billion cubic feet per day after 20 months; it is now producing 14 billion cubic feet per day.
Natural gas production in Ohio’s Utica shale is currently running about 1 billion cubic feet per day, the EIA said.
Ohio’s shale is producing more liquids than the Marcellus shale, which yields nearly all gas.
The EIA said production per rig in Utica Shale outpaces other shale plays around the country.
That is because Utica drillers have gained experience in other shale areas and are tapping successful wells in southeastern Ohio, especially in Belmont and Monroe counties, the federal agency said.
Last week, the EIA said it intends to add the Utica shale to its monthly Drilling Productivity Report, beginning with the August report. That puts the Utica among the top seven shale areas in the country.
— Bob Downing
This is madness, there appears to be no discipline in the oil and gas industry. Oil price keeps dropping, natural gas can't get above 3.95/mcf, and yet we keep putting more wells online.
In the paper industry, when the market is soft because there is too much paper on the market, companies either slow machines down or take machines off line for a period of time until the market improves. It may only take one machine going down for 5 days to do this.
Why is there no discipline in the Oil/Gas industry? I know they have to drill to hold leases but seems like they could at least choke existing wells back to reduce amount of oil and gas being put into the market place.