NATURAL GAS PRICE COLLAPSE IN 2009
SOUNDS LIKE MORE BAD NEWS FOR NEAR TERM FUTURE GAS EXPLORATION AND PRODUCTION, HOPE NOT!
Market Insight: Winter spike won't prevent natural gas price collapse in 2009
PennEnergy
Even a sharp spike in US natural gas prices owing to colder-than-normal weather heading into yearend won't prevent a gas price collapse in 2009.
The supply fundamentals simply won't allow that to happen, according to Raymond James & Associates Inc. Put simply, there's just too much gas out there.
The summer gas storage season ended at about 3.5 tcf even with the continued shutin of nearly 300 bcf of gas caused by hurricane damage. To balance the US natural gas market in 2009 and 2010, the industry will have to cut back gas drilling activity and even shut in more wells.
Depending upon how cold it gets this winter, US gas producers will have to shut in anywhere from 500 to 750 bcf of gas to balance the market next year, according to RJA. That would be the case if gas prices slip below the analyst's 2009 price forecast of $6.75/Mcf.
Apart from excess supply, RJA is also concerned about stagnation in gas demand resulting from the economic slump. Its model shows the market drawing 600 bcf less from storage this winter than last winter.
RJA also insists that its outlook is fairly conservative, as gas production was on track to grow by 9% year-on-year before the hurricanes hit the Gulf of Mexico region in the hitrd quarter. Because production lags rig activity by several months, expect year-on-year gas supply increases to continue through 1Q 2009.
In other words, the analyst thinks its own model might be a tad bullish: If gas supply growth continues on its current trend and winter weather hews more to the 10-year (warmer) average for temperatures than to the 30-year average, then that $6.75/Mcf forecast might look pretty good to producers.
Contact Bob Williams at bobw@pennwell.com
Market Insight: Winter spike won't prevent natural gas price collapse in 2009
PennEnergy
Even a sharp spike in US natural gas prices owing to colder-than-normal weather heading into yearend won't prevent a gas price collapse in 2009.
The supply fundamentals simply won't allow that to happen, according to Raymond James & Associates Inc. Put simply, there's just too much gas out there.
The summer gas storage season ended at about 3.5 tcf even with the continued shutin of nearly 300 bcf of gas caused by hurricane damage. To balance the US natural gas market in 2009 and 2010, the industry will have to cut back gas drilling activity and even shut in more wells.
Depending upon how cold it gets this winter, US gas producers will have to shut in anywhere from 500 to 750 bcf of gas to balance the market next year, according to RJA. That would be the case if gas prices slip below the analyst's 2009 price forecast of $6.75/Mcf.
Apart from excess supply, RJA is also concerned about stagnation in gas demand resulting from the economic slump. Its model shows the market drawing 600 bcf less from storage this winter than last winter.
RJA also insists that its outlook is fairly conservative, as gas production was on track to grow by 9% year-on-year before the hurricanes hit the Gulf of Mexico region in the hitrd quarter. Because production lags rig activity by several months, expect year-on-year gas supply increases to continue through 1Q 2009.
In other words, the analyst thinks its own model might be a tad bullish: If gas supply growth continues on its current trend and winter weather hews more to the 10-year (warmer) average for temperatures than to the 30-year average, then that $6.75/Mcf forecast might look pretty good to producers.
Contact Bob Williams at bobw@pennwell.com
Views: 124
Replies to This Discussion
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Permalink Reply by P.G. on
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Mmmarkk wrote:
'That's funny. We got involved in WWII and there was no dependency on someone's oil.'
Think of how difficult it would have been if would have been dependent upon someone's oil?
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Permalink Reply by The_Baron on -
Yes there was. The Japanese bombed Pearl because we cut off their oil. Remember in the 30's and 40's we had the east texas oil boom and we were a oil Exporter
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Permalink Reply by The_Baron on
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I also believe we got invloved in Veitnam because of oil. If you look at map of the sedimentry basins of th world, SE Asia is right in the middle of one. I think we weren't really worried about a bunch of communist rice farmers, but the Russians controling more of the world oil reserves.
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Permalink Reply by The_Baron on
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No, I just believe that most wars can be attributed to a grab for resources or land. No that the age of imperilism is long past, land is not the issue, but energy because it is the most valuable resource.
saddam invaded Kuwait for control of their highly produvtive oil fields. We attacked Saddam (Iraq part 1) to insure our access to the oil and protect Saudi Arabia (because of their oil). You don't see us promoting democracy in places like Rawanda, because Rawanda has no known oil reserves. -
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Permalink Reply by Dorcheated A1 on
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Hey GD,
I hate to hit you up twice in 30 minutes but a need a history lesson from a college man.
Can you tell us here in threadville if that was a Democrat or Republican admistration that got us into Vietnam. And would you please explain the incident in the Gulf of Tonkin to us.
This ought to be interesting let's see what he say's. -
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Permalink Reply by Bill G on
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Baron this is a good point,
All of the cases that you metioned have one thing in common. We left the war winners but the assetts remained the original owners. I think this is because america does not want to own the oil just dont want the evil in control of it. Its like kill the man with the football, oil being the football....if you have it in the mass quantities like these countrys you just have a big target on your head same as carrying the ball. -
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Permalink Reply by The_Baron on
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All we are fighting for now is to prevent a disruption in supply. I would hope that any withdrawal agreement with Iraq would include some type of first refusal on oil sales. We would agree to pay the market price, and Iraq would guantee the U.S. its exported oil.
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Permalink Reply by BirdDawg, plain ole' idiot on
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Dorcheated,
HA HA HA
Probably won't be able to understand the response. -
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Permalink Reply by Dorcheated A1 on
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GD,
Let me translate that for everybody. We got into Vietnam because a Democrat adminstration trump up a fake incident in the Gulf Of Tonkin. No Gulf of Tonken no Agent Orange. It took me three sentences to explain it GD. -
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Permalink Reply by Joel on
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Looking back further I'll make a case it was Gavrilo Princip's fault we got into Vietnam, with an 'assist' to the French.
What? Who? How?
Princip was the Serbian anarchist who shot Franz Ferdinand in 1914 - which started WWI. The screwed up treaty ending WWI caused WWII (Eur) by fueling Nazi rise to power. Nazi's beat France (in a gnat's hearbeat) and shortly thereafter forced France to give their Indochina colony to their allies the Japanese (who were looking for oil 'in all the wrong places'). Allies incited Viet indigs to rise against Japanese occuptation for independence to create a fifth column, but after Japanese surrender, handed Indochina back to France instead. Viet locals got ticked - and we now segue to a weak post-war France trying to hold colonies and Russia/China helping them break free. Now enter Eisenhower, Kennedy et. al. and the dominos.
So you see, there's a good argument it was Mr. Princip's fault. I don't think he was Republican or Democrat. I do believe there's a case if Wilson (a Democrat) had pushed for a decent Versailles treaty or if Truman (a Democrat) had told France to give up their colony in 1945 there'd have been no war in Vietmam for us to inherit. But that's not quite fair. Better questions are how did smart folks make what they thought were good decisions that turned out so poorly, and what could we learn from that.
My 2 cents worth (for free, on a chilly Friday afternoon!)
Best,
Joel -
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Permalink Reply by Martin on
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Mmmark --
Can not get this to post right after our original remark....
Absolutely right. Just ran across the facts on oil supply at the start of WWII.
The USA had 40% of the known world oil reserves. That's right folks! 40%! Remember -- the oil reserves of North Africa and the Middle East were as yet pretty much unexplored. My father recalled flying out of Barksdale AFB at night in the 1939--1940 time frame. He described major portions of East Texas ablaze at night because of all the NG being flared off from the wells.
Hitler invaded the Ukraine to obtain it's oil. Even if he could have done so and restored production the Third Reich would still have been short on petroleum products. Remember, the Germans initial objective in the Battle of the Bulge was to reach the supply yards in northern Holland -- many of their vehicles were carrying empty fuel barrels in hopes of finding American Army supplies.
The USA was a net exporter of petroleum products in WWII.
Also, Japan was not just short of oil. To the best of my knowledge, Japan's only natural resource is coal. They have to dig mines from the shore out under sea bed to get it. They have no metal ores within their national boundaries.
That was one of the national scandals during the early days of the war. We had been selling Japan major amounts of scrap metal. I seem to remember seeing some wwII potboiler movie, where a GI is grousing about a Japanese air raid that had just concluded "I'm tired of those nips dropping my dad's old Model T on me...." pardon the racial epithet --
GoshDarn -- I think he meant the USA was not dependent on oil imports. I'm sure if I'm wrong about that someone will point it out to us. By the way, I had an uncle in the Navy, who served on a destroyer at Okinawa and Iwo Jima. I had another uncle who went ashore at Normandy on D day + 10 who served in Patton's army from the day it was formed for the duration of the war.
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Permalink Reply by Betty Gail on
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We didn't voluntarily get involved in WWII, we were attacked!
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