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 The_Baron on -
I prefer to think of social security as a defered tax rebate. It makes me feel better about watching my hard earned money going to never never land. As a man in my thirties , I wonder if I will even get what I pay in much less any gains.
Also, T. Boone can make all the money he wants, he'll probally give a bunch away when he dies anyway. I'm sure Oklahoma State can find some other buildings to put his name on, might make it hard to find your class though...
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Permalink Reply by Bobi Carr ("parker") on
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I hope he makes enough to buy viagra for his great, great grandchildren and generations to come.
Why is there a problem with him making money?
What is wrong with a win/win situation?
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Permalink Reply by The_Baron on
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Thank you KB,
This is a good consise history of how we got into that mess. I didn,t realize when I made my comment that we would get into such a spirited conversation about Vietnam. I was only trying to point out that many conflicts are begun as an attempt to control land or resources. Also that the official doctorine whether its the domino theory or WMD's is possibly a front to make a war for oil reserves politicaly possible.
The good people of this country do not want to go to war for oil, but to fight an evil dictator or communism is a noble cause.
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Permalink Reply by Martin on
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I would like to add to some of the early Indochina background. By the late 1930's there were at least three anti-French, anti-colonial movements in Indochina. When the Japanese invaded Viet Nam, they proclaimed themselves liberators of their fellow Asians. Ho Chin Minh (?) became the leader of one of the anti-French political groups prior to the Japanese invasion. I beleive he was a nationalist before he bacame a communist -- that happened while visiting Paris in the '30s. After the Japanese invasion, he lead one of the three gorilla military groups that opposed the Japanese. We supplied him, and the other two groups, as we did Tito, with air dropped munitions. After Japan surrendered in 1945, Ho Chin Minh and the other gorilla leaders petitioned the USA to intercede with the French and ask them to not to return to Indochina. We in turn, thought that was a novel thought. The British had long before announced plans to liberate their colonial holdings after the war. India in 1947-48, Africa took well into the late 50's. We thought the petition from the gorilla units in IndoChina such a good idea, that we asked the French to liberate all of their colonies. The French, being French, refused. Ho Chin Minh was busy making offers the other gorillas couldn't refuse. His response when he was informed of the French refusal: "Better to smell French merde' for a generation than Chinese shit for the rest of our lives." Pardon, but that is an exact quote, aside from spelling errors. China and Viet Nam have been fighting for several hundred years. We ended up financing the French fighting in Indochina from 1952 onward. We covered 1/3 to 1/2 of all French costs in their war effort. Air America, a CIA operation in Indochina, started operations in the very early '50s. The French ended up concentrating their forces at Dien Binh Phou (spelling? ... it's been a long time folks). The Viet Minh occupied the mountains around the French position. The only problem the Viet Minh had was hauling in ammunition fast enough to kill the French. We resupplied the French via Air America. Before the French surrendered, they met with us in DC and asked for relief by American forces. We refused. As a last ploy, they asked if we could drop a nuclear bomb on the other side of the mountains from the French position. We said no. So the French negotiated a peace treaty (essentially a surrender) and agreed to the partition of Viet Nam into the North and South.
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Permalink Reply by BirdDawg, plain ole' idiot on
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Gosh Darn,
I agree 100%. And if we could only say the same about your usual posts. If they were only clear and to the point.................................
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Lemme go fix another gin and tonic.
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I can't disagree with that. And I tip my hat to you Jim.
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KB and Jim,
I ain't fighting with you, you my dogs.
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J.K.,
Your right on
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K. B.,
My good friend. Unfortunatly I have had slight (maybe not so slight) altercations in Jackson MS, well maybe also Memphis, TN, San Antonio, TX, Austin, TX, Dallas TX, Shreveport, LA, Arcadia, LA, Campti, LA (that was scary); Ruston, LA (gotta love the home town), need I go on. I could. But I ain't. But then again, I am not real smart.
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KB,
unfortunatly I have spent a lot of my time in Honky Tonks, but never been to Davie, Florida.
I do know South Texas bars have been brutal on my old bod.
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Permalink Reply by Martin on
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One of my Cajun buddies is a volunteer Emergency Medical Tech. One afternoon we were driving to an off site office beer bust and BBQ supper. We passed one of the scruffiest, rundown Honky Tonks in the area. He commented that his team parked their ambulance in the bar's parking lot on the weekends. Dummy me says "Why?"-- he said that they didn't have to drive very far to answer the first couple of calls. He said on some Saturdays even the Sheriff would park a car in the lot. Didn't seem to reduce the number of fights, but did reduce how long they lasted and the severity of the injuries.
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