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Page added on December 24, 2014

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As winter arrives, natural gas is becoming less expensive

As winter arrives, natural gas is becoming less expensive thumbnail

Natural gas, the nation’s most prevalent heating fuel, is getting cheaper just as winter is arriving because supplies are plentiful and temperatures have been mild.

The price of natural gas has dropped 30 percent in a month, to $3.14 per 1,000 cubic feet on Tuesday from $4.50 in late November. That’s a steep drop even for a fuel notorious for volatile price swings.

The lower prices are expected to linger and could reduce electricity prices and heating bills in the coming months. Natural gas is used by half of the nation’s households for heating and to generate 26 percent of the nation’s electricity.

Kansas City area consumers who pay a cost-of-gas charge that changes monthly should see a decline. But the effect of the lower wholesale price is muted because area gas utilities have already bought some of their supply for this winter.

Propane consumers also have good news this winter. They were slammed with higher prices last winter because of supply shortages, but average residential propane prices are now at $2.38 a gallon, down 33 cents from a year ago. Propane stockpiles are at 78 million barrels, up 28 million barrels from a year ago.

Natural gas often rises as winter weather approaches, and a frigid November sent the price higher. But December warmed up, and temperatures for the rest of the winter are expected to be close to normal.

Bob Brackett, an analyst at Bernstein Research, wrote in a recent note to investors that he expects natural gas to average “in the low 3s” into the spring, and a warm winter could push the price below $3.

Last year at this time natural gas was near $4.50, and it reached as high as $6.15 in February after unusually cold weather gripped the eastern half of the country and stuck around for weeks. Prices in some locations averaged double or triple that amount as pipelines struggled to carry all the gas that was needed.

Because of the way natural gas and electric utilities are regulated, customers probably won’t see the recent drop reflected in their bills right away. Many will instead see higher prices as a result of last year’s price spike.

But the lower market prices could at least slow the rise in retail prices and perhaps reverse it if the low prices last.

Conditions look good for low prices throughout the spring, but they could reverse later next year, analysts say.

One-fifth of the nation’s natural gas production is from gas found when drilling for oil, “associated gas.” A drop in the price of oil is forcing drillers to cut back, and that may slow the growth in production of associated gas

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20 Comments on "As winter arrives, natural gas is becoming less expensive"

  1. Kenz300 on Wed, 24th Dec 2014 10:37 am 

    Natural gas and oil are less expensive NOW but that is temporary……..

    Alternatie energy sources provide safe, clean, reliable energy with no monthly fuel bills and no price spikes or drops. They continue to get cheaper every year and are increasing their market share.

    Climate Change is real…… it is time to move away from fossil fuels.

    ————————-

    Solar and Wind Provide 70 Percent of New US Generating Capacity in November 2014

    http://www.renewableenergyworld.com/rea/news/article/2014/12/solar-and-wind-provide-70-percent-of-new-us-generating-capacity-in-november-2014

    ———————-

    Restored Forests Breathe Life Into Efforts Against Climate Change

    http://www.nytimes.com/2014/12/24/science/earth/restored-forests-are-making-inroads-against-climate-change-.html?

  2. Nony on Wed, 24th Dec 2014 10:56 am 

    Where’s Berman with his gas needs to be $8 yammer. We’re sub-4 with increasing volume.

  3. SugarSeam on Wed, 24th Dec 2014 2:13 pm 

    Does everyone just ignore this troll, Nony? Seems so.

  4. ghung on Wed, 24th Dec 2014 2:43 pm 

    SugarSeam – “Does everyone just ignore this troll, Nony? Seems so.”

    Gosh, no SugarBaby, no more than we could chit our favorite tard. I even wrote a song in his honor; “Oil luvs me this I know, For the Nony tells me so.” It’s a sing-along:

    http://peakoil.com/generalideas/the-oil-drum-peak-oil-videos

  5. rockman on Wed, 24th Dec 2014 3:01 pm 

    Yes: lots of NG. But not many companies specifically drilling for it:

    U.S. Natural Gas Drilling Rig Statistics:

    Current natural gas drilling rigs: 338
    Active rig count one year ago: 372
    Change from last year: -34

    Rig Peak (hit on 9/12/08): 1,606
    Percentage decline from peak: -79%

    U.S. Oil Drilling Rig Statistics:
    Current oil drilling rigs: 1,536
    Active rig count one year ago: 1,395

    Change from last year: +141

    Hmm…141 more rigs drilling for oil now then a year ago. I wonder how many rigs will be drilling for oil in a year? The drop in NG prices back when the gas shales were booming lead to the rig count dropping about 80%. I doubt the rigs chasing oil will drop that much with the oil price slide.

    But time will tell. But fewer oil wells = less associated NG. And given NG prices, adjusted for inflation, are back down to where they were in the big ’08 bust it seems unlikely that rig count will increase in the coming months.

  6. Nony on Wed, 24th Dec 2014 3:06 pm 

    The productivity per rig is incredible. Massive wells coming in in the Marcellus and Utica.

    Yeah, associated natgas may go down. But we sure ain’t seeing any fear in the futures market…

    Face it, Rock. The Marcellus delivered. Berman and all the yipyaps saying prices would be 6+ or 8+ were wrong, wrong, wrong. We have low prices AND high volume.

  7. Nony on Wed, 24th Dec 2014 3:21 pm 

    http://www.eia.gov/petroleum/drilling/pdf/marcellus.pdf

    16 BCF per day.

    Rigs have been ~100 for over two years now. And remember shale is fast decline. But output is growing 3 BCF/d/year. How? 100 rigs is sufficient to replace decline and still grow! It’s enough to outpace the Red Queen.

    Oh…and look at new well gas production per rig. A lot of comments about drilling the sweet spots first, running out of sweet spot, etc. etc. from the peakers. But instead what do we see? Longer laterals, better IPs, more fracks, even more knowledge of the play. They really DID learn to do things better.

  8. Nony on Wed, 24th Dec 2014 3:25 pm 

    And check out the Utica

    http://www.eia.gov/petroleum/drilling/pdf/marcellus.pdf

    It’s growing a BCF/d/year itself. And that’s a young play with a LOT of areal extent. Heck they are still really learning where the monster wells come in and finding surprises (like north central PA sweet spot).

    Oh…and this ain’t happening with some Rockman POD equivalent of $100 oil. It’s at sub-4. At a price that kicked your ass out of drilling in the GOM.

  9. Bost on Wed, 24th Dec 2014 6:43 pm 

    I believe in peak oil, peak everything. Picking on nony because he is more right at this point in time is unfair and silly. Doom will happen because it must but much farther in the future when most of us are dead. Locally I am curious to see what the Mexico fracking will produce. PS bought gas at $2.07 today. Nony is wrong in the short term? HeHe

  10. Makati1 on Wed, 24th Dec 2014 6:48 pm 

    This is NOT good news for future NG or for jobs. Nor will it boost GDP as the money saved on fuel will likely be put under the mattress or used to pay down debt. It could add to the increasing likelihood of a crash of the US financial system next year.

  11. toolpush on Wed, 24th Dec 2014 9:03 pm 

    I must say, I have to agree with Nony on the Nat Gas market. When the price of a product drops significantly, yet the supply still increases, then there has been a change in circumstances. The local price of gas in the Marcellus has been $2-$2.50, yet the Marcellus has still increased production significantly. I don’t believe this production is from drilling to just hold leases?

    So far shale oil has increased production with an increasing oil price. The question to Nony and his friends. Can they continue to increase shale oil production with a decreasing oil price? I have my opinion, I would be interested in knowing Nony’s.

  12. Nony on Wed, 24th Dec 2014 10:47 pm 

    I think the LTO will drop. Maybe faster than people expect. You have the winter slowdown anyway in the Bakken. And then rigs are already starting to drop. Probably a lot of calendar year contracts expiring that lead to another big drop in a few days. Hamm thinks we’ll be down to 90 rigs in the Bakken. You need ~140 to keep pace. MAybe the EF grows a bit longer, but the Permian and several marginal plays (Lime, TMS, etc.) will go away fast. I’m actually thinking it turns even faster than the EIA predicts. Maybe January and then continued down. It won’t be a shark fin. But a definite decline.

    But I’m just going off of feel, from reading. I’m not an analyst or an oilman.

  13. Nony on Wed, 24th Dec 2014 11:43 pm 

    https://www.youtube.com/watch?v=Vcjmt9ckU5o

  14. toolpush on Thu, 25th Dec 2014 4:24 am 

    Well Nony,

    Good to see we are not too apart with our thoughts. From the early reports from Oasis and Continental, the Bakken could be in for a 50% cut in drilling rigs by the end of the first quarter.
    Another thing to watch for is the presence or absence of further bankruptcies, I expect a few, but how many may be a telling point?

  15. Makati1 on Thu, 25th Dec 2014 7:25 am 

    Prices below the cost of recovery and distribution will only last until those wells are delineated. No new wells means no NG (or oil) soon and higher prices for imported. No? Why Not?

    How long can you sell wigits for $5 when they cost $10 to make?

  16. Nony on Thu, 25th Dec 2014 9:25 am 

    Makati1:

    Agreed. There’s some glut to work off. But it won’t go to 100. The problem there is that shale is just too abundant at 100. US would add 1-2 MM bpd/year until the cows came home at 100. [For all the kvetching about limited sweet spot and voodoo financing, that industry does GREAT at 100.] At 55, it shrinks. Somewhere there is an equilibrium.

  17. JuanP on Thu, 25th Dec 2014 9:37 am 

    Nony “I think the LTO will drop. Maybe faster than people expect. You have the winter slowdown anyway in the Bakken. And then rigs are already starting to drop. Probably a lot of calendar year contracts expiring that lead to another big drop in a few days. Hamm thinks we’ll be down to 90 rigs in the Bakken. You need ~140 to keep pace.”

    While reading your comment i felt like they were my own words or thoughts that I was reading. I am in complete agreement with you that the EIA’s forecast for LTO in 2015 is overly optimistic. Just my opinion based on what i’ve read and know, but just like you I am not an expert.

  18. Nony on Thu, 25th Dec 2014 9:46 am 

    Yeah, but you’re a nice guy.

  19. JuanP on Thu, 25th Dec 2014 10:00 am 

    Nony, I only pretend to be. 😉

  20. Nony on Fri, 26th Dec 2014 9:12 am 

    Price dipped below $3.

    http://www.businessweek.com/news/2014-12-26/natural-gas-futures-drop-below-3-for-first-time-since-2012

    Currently at 2.98!

    JAN 2015 Show Price Chart 2.984 -0.046 3.030 3.067 3.098 2.980 4,560 4.530 / 1.530 08:57:34 CT
    26 Dec 2014

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