Monday, November 22, 2010

Dian L. Chu:Natural Gas: Better Days Ahead....in Two Years

Natural gas posted the first weekly increase this month in the week of Nov. 14, on forecasts of colder than normal temperatures in most of the eastern U.S. from Nov. 24 through Nov. 28, which could spur an average 20 percentage rise above the normal heating demand. Natural gas for December delivery down 25 percent this year gained 9.6 percent in one week to settle at $4.164 per Mmbtu on the NYMEX.

However, this temporary seasonal strength does not alter the fact that U.S. gas stockpiles climbed to an unprecedented 3.843 trillion cubic feet in the week ended Nov. 12. A 9.3 percent above the five year average level and 0.3 percent above last year’s level.

As I said before that we are literally swimming in crude oil amid high inventory, but when it comes to natural gas, “drowning” would be a more appropriate description. While crude was hammered by China’s efforts to curb inflation, natural gas has an even bigger problem, nowhere to go, since it is region bound, and not as widely traded.

Worse yet, the latest short term outlook published on Nov.9 by the Dept. of Energy estimates natural gas production will rise in 2010 to the highest level in 37 years. Marketed natural gas production is forecast to increase by 2.5 percent this year, and fall by 1.2 percent in 2011.

However, the drop in 2011 is not because of a decrease in shale gas production, but mostly a result of a 13.5 percent production decline in GOM production from the 2010 drilling moratorium......Read the entire article and see Dian's charts.



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