Replies to This Discussion

Permalink Reply by essay on December 2, 2013 at 9:48

i have to agree with this, and it might even turn out to be optimistic.  only time will tell.

Permalink Reply by adubu on December 2, 2013 at 6:42

jffree1---- the reason i think NG prices increase if crude prices fall into the $75 range is that drilling in liquid rich shale drops off therefore NG production falls ( These wells produce a lot of NG)  therefore supply decreases along with the increase demands in USA due to usage of NG has increased from around 70 bcfd to 73 bcfd today--- these  changes will have effect on NG prices

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Permalink Reply by tc on December 2, 2013 at 6:54

What Adubu sees is that US oil production has associated NG production.  In the case of the Eagle Ford in some areas the NG equals 40% of production.  So if oil prices decrease along with NGL prices which correlate more with WTI prices then drilling for US oil slows and then stops and the supply of NG decrease.  The Middle East can drill for new oil at sub $75 and still be profitable the US shale can't.  Now the time frame of these events IF they happen is measured in years, which makes this as predictable weather forecasting. 

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Permalink Reply by adubu on December 2, 2013 at 9:17

tc--- agree cold weather is very helpful to NG prices it is very seansonal but times are changing and muliple thing affect supply and demand much more today than decade ago-- and as nixon dow says E&P Co do not just sit around they will find project and drill because that is what they do

Permalink Reply by Nixon Dow on December 2, 2013 at 7:07

I believe the commonality between oil and gas has that everyone is referring to has nothing to do with standard supply and demand of the two. The relationship between the two has more to do the way the E & P companies will look at the situation. If/when(which I don't think will happen) oil goes below the $80 threshold the liquid rich plays ROI will decrease dramatically. When that occurs development will decrease and as a result the overall NG output will go down as well. Less NG means increase in price. 

One thing we have to remember is that in order for the majority of the other shale plays(outside of the haynesville) to expand production, companies will have to develop costly infrastructure on top of the standard cost of drilling and completions. 

At the end of the day E & P companies just don't stand still, regardless of the market they will continue to develop one project or another. As I see it when if oil prices go down and gas prices go up marginally the Haynesville becomes the most economic and least costly of the the plays to develop. 

This is just my two cents but, in order to have the best longterm outcome for the Haynesville and NG prices, we should actually want NG prices to stay under $4 for at least the next year and half. As long as prices are under that mark, the advantage to to convert to NG will still be present. The longer price stays down the more dependent NG will become.

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Permalink Reply by adubu on December 2, 2013 at 11:44

jffree1--I agree  NG prices are local USA market and not global although there is some correlation to global  oil prices to drilling in liquid rich field that also produce a lot of NG so if oil prices drop into the $75 range then it will effect drilling in these plays so indirectly has effect on NG supplies which will have effect on NG prices to some degree. I am not talking NG back to $10--NO-- but could increase it $1+ slowly over next couple years and stay in $5 range. That could help HS dry gas drilling activity

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Permalink Reply by Paul Patel on December 5, 2013 at 13:09

Joe, are you hypothesizing about the price or do you have any information to support that analysis?

Could you provide links to articles or reports if possible.

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Permalink Reply by dbob on December 6, 2013 at 5:49

Paul

You might want to look at the EIA website http://www.eia.gov/

You'll have to dig, but you can find all kinds of interesting projections. 

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Permalink Reply by Joe Aldridge on December 6, 2013 at 9:30

Paul,

A little of both.

(1) There are several direct conversion from NG to Diesel in the works that should be coming on line now. (2) This looks like this is going to be a colder than normal Winter. (3) There is more use of NG for electric generation because of the restriction on the coal industry. And the price of NG moved from 3.96 yesterday to 4.13 today.

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Permalink Reply by Aubrey C. Sanders, Jr. on December 6, 2013 at 9:49

$5.. gas on 2/2/14

Permalink Reply by jffree1 on December 2, 2013 at 4:17

I haven't heard anything about the lifting of ALL sanctions on Iran. Any analyst saying that is mildly delusional, IMO, or looking too far down the garden path... with rose colored glasses on. There has already been a "spat" between SOS and Iran over just what they agreed to with Iran flat out calling Kerry a lying liar lying to the American people (not to mention the world). Further, they only have a "framework" for an agreement (obviously not a very sturdy one) that would have a six-month expiration date. Details to follow...

While this is a handy way for the media to change the subject from the latest, greatest name brand debacle here at home... there are Senate hawks on both sides of the aisle who would love to derail this Iran deal at the slightest hint that there is a problem.

Biggest problem with the Iran deal? It could set off a nuke race in the ME with the Saudis leading the charge. I look for OPEC supply to get tighter over the next year (anyone remember what caused the Carter era gas lines?) pushing oil higher as Iran's neighbors jostle for position. Oh, and Syria... not a big producer but their CW is spilling over to other countries now because nobody has any control of the various jihadi factions and hostilities will probably get worse in the entire region before they get better. Maybe bigger than the built in price points for regional hostilities, I expect.

 Just my 2 cents... no $75 oil in 2014.

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Permalink Reply by Skip Peel - Mineral Consultant on December 2, 2013 at 5:19

I'm seeing numerous articles along the line of this WSJ piece.

http://online.wsj.com/news/articles/SB10001424052702303562904579227...

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