Thursday, April 30, 2009

WSJ: US Now Swimming in Natural Gas

Natural gas prices have hit their lowest levels since 2002, because, well, there's just an awfully lot of it available right now.

The Wall Street Journal reports that years of higher natural gas prices this decade has spurred more drilling and innovation, resulting in a production rise of 11% over the past two years in natural gas.  Amazing how "smart" markets can be when they're given the chance.

Just as the cure for high prices is high prices, we try to remind ourselves that the opposite is true as well, as low prices are now causing producers to scale back their efforts to bring new demand online.  

Natural gas prices are hovering just below the important $3.50 mark, which is widely regarded at the "shut in" price for "The Natty" - the point at which drillers are better off going home than drilling for more gas.

How long will the current glut last?  I've read smart views and people on both sides of the debate - some think natural gas will continue to slump, others believe a pop is a decent specualtion.  

Remember that demand is 1/2 of the supply/demand equation, so a lot of the natural gas friendly initiatives described in the WSJ piece could certainly be bullish for prices if they come to fruition.

Source: Wall Street Journal

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warrior king said...
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