Comments on: Could Natural Gas Go to $4/MMBtu?

By: Anonymous

Anonymous — Tue, 25 Nov 2008 16:51:00 +0000

i discount platts normally and particularly here..there is a great consensus for natural gas prices to rise a bit. also notice it has been the steadiest of commodities

By: mxq

mxq — Tue, 25 Nov 2008 15:17:00 +0000

Via Fadel Gheit note from yesterday:

"the unprecedented rise in oil prices resulted in bad investmnets by the industry as companies lost their discipline in chasing the oil bubble...investments that do not yield returns above the cost of capital at $60/b oil or $6/mcf gas are doomed to fail."

We've had numerous consecutive builds in nat gas inventories, though the cold season has yet to shift into full gear.

However, keep in mind nat gas fell to sub $3 levels during the last recession, yet this recession is quite possibly worse, both in terms of industrial and consumer demand.

Prop 10 didn't pass on the west coast. So it appears that since 2002, there has been little net adds in terms of demand for nat gas (see here). Yet we have dramatically increased supply.

To mmckinl's point: "Much of this newly discovered nat gas will not be developed and much of it capped." -- And that's by virtue of the bad investment decisions of nat gas co mgmt. (My pet theory is McClendon and TBoone went on TV to plead for nat gas and hope that demand would materialize at these unsustainable prices and make them a lot more rich.) So yes it will be capped, but thats only after a lot of pain.

By: lineup32

lineup32 — Tue, 25 Nov 2008 15:09:00 +0000

$2 is also on the table, a longterm price support level.

By: Anonymous

Anonymous — Tue, 25 Nov 2008 14:36:00 +0000

A nice under looked part of Waxman replacing Dingle as head of the Energy commite is he opposition to Hydraulic fracturing. If his new rules are put into place you could see all new Natural Gas production shut down for a year or two.

Given the huge decline rates in NG that will be fun for the energy markets.

By: Glen

Glen — Tue, 25 Nov 2008 08:04:00 +0000

Great news. Inpex is planning on building a gas plant in my home town – hope these prices make them abandon the project.

By: mmckinl

mmckinl — Tue, 25 Nov 2008 07:42:00 +0000

Except that with the dramatic fall in price many of the small to medium size companies will be going bankrupt and their wells capped.

There is already a severe credit crunch in the oil and gas fields for all except the very largest most well capitalized comapnies.

Much of this newly discovered nat gas will not be developed and much of it capped.