Posts tagged “futures”
We all remember our Economics 101 lesson that price is the equilibrium point between supply and demand, and that fact has not changed. Right now, there are a plethora of opinions about the future direction of natural gas (NG) prices, both immediate and long-term, and you have probably heard most of them. Suffice to say, with the range of projected NG prices so wide, I decided to take a hard look at the data and keep my projected view of NG prices on a very short-term timeframe. Quite frankly, looking out more than one year is pure speculation even if it’s based on educated analysis.
The U.S. Energy Department (EIA) reported that U.S. gas inventories were 2.2 trillion cubic feet (Tcf) for the week ending February 22nd, a decline of nearly 6% year-to-date (YTD) compared to last year for the same period; however, storage remains 16% above the five-year average. Comparing the YTD averages since 2008, NG still remains above prior years except for 2012. So we have good news and bad news, good that 2013 NG levels are running below 2012, bad that NG levels still remain at very high levels.
Let’s look at the good news; it appears that NG production has slowed in early 2013. I looked at my NG database that covers U.S. NG production; year-over-year production 4Q 2012 to 4Q 2011 is flat at roughly 0.0% with the multinationals down 4% YoY on the quarter, and the U.S. Independent E&Ps up only 2% YoY on the quarter.
I saw a comment from someone yesterday that if this week’s inventory report shows a sharp drop in crude inventories, oil will probably spike up above $100. I do think that because of the storms in the North Sea and the flooding in Mexico we will see a decent inventory draw this week. But I don’t think the price will spike to $100 on the news, because this week is complicated by a number of factors. The first is that the inventory report will be delayed by a day this week, due to the government holiday on Monday. The second is that the front-month WTI contract expires the day after the inventory report is released. There are a lot of… Continue»