Exploring Hydrocarbon Depletion
Why Cheap Natural Gas Is HistoryNatural gas prices averaged a little more than $2.50 per mmBtu (million British Thermal Units) in 2016. Those days are over. Prices will average at least $3.50 to $4.00 in 2017.
Prices have more than doubled since March 2016 but gas is still under-valued. Supply is tight because demand and exports have grown and shale gas production has declined. In April of last year, I wrote that natural gas prices should double and they did. Henry Hub spot prices increased 2 1/2 times from $1.49 to $3.70 per mmBtu and NYMEX futures prices doubled from $1.64 to $3.30.
Nevertheless, gas prices are still too low. Storage was at record high levels throughout 2016 reaching 4.1 Bcf (billion cubic feet) and 84% of working capacity in mid-December. Storage has fallen 1.1 Bcf in the last month to 61% of capacity. That is below the 5-year average.
EIA SHORT-TERM ENERGY OUTLOOKHenry Hub Spot Prices (dollars per thousand cubic feet)
2015 2016 2017 2018
2.72 2.60 3.67 3.85
kublikhan wrote: Why Cheap Natural Gas Is History
Only the Marcellus and core Utica break even at $4 gas prices. The Marcellus has stopped growing and more pipeline capacity to better-priced markets won't happen as quickly as some analysts believe. Although the Utica play has growth potential, it will be spread over several years and will be largely cancelled by increased exports.
Shale gas magical thinking remains strong but the paradigm of infinite, cheap supply is no longer working. There is now too much demand between power consumption and exports to keep up with declining production.
Once decline begins, it is almost impossible to turn around short of a massive drilling campaign. The requisite capital and public support are simply not there.
Goner - First, I have no idea how they define a "break even price". In 40 years I've never seen that term used once in the oil patch.
Doc - Sorry but your definition doesn't work.
Name on trend you ever worked that ever prospect worked at the same $ per bbl or MCF. IOW you seem to be saying that every Marcellus well has the same payout time at $1.35/MCF or produces the same ROR at $1.35/MCF.
So again you need to explain what that $1.35/MCF in the Marcellus Shale means. If the play is attractive at that "break even price" and NG prices are significantly above that level why has activity fallen off? It seems as though the BEP is being presented as an important predictive metric: how so?
But to be clear: in 40 years I've not heard the specific term "break even price" in a single discussion of a prospect's economic analysis.
The standard error can be used to construct a confidence interval centered about the estimate. For example, the published weekly estimate of the net withdrawal for January 20, 2017, is 119 Bcf, and the standard error of the net withdrawal is 2.9 Bcf. The 95% confidence interval ranges from 113 Bcf to 125 Bcf.
Sales of sedans and other cars fell to the lowest level in six years last month, while light trucks set a January record.
Indeed. Natural gas dropped back into the $2 band. I guess that's still mild compared to the $3 to $12 jumps though:ROCKMAN wrote:k - Yep, NG prices have been relatively stable for a while. Just as they were between 2002 and 2006. And then in the next 3 years yo-yo between $3 and $12 per MCF. As always oil/NG prices tend to be rather predictable. Until, of course, they aren't the least f*cking predictable. LOL.
Natural Gas Bulls Crushed As Prices TankNatural gas prices plunged to their lowest level since November on mild weather in the U.S., which has caused storage levels to decline at a much slower pace than expected. Front-month natural gas prices fell to $2.63/MMBtu in the third week of February, down from nearly $4/MMBtu at the end of last year.
The winter of 2017 is turning out to be the second warmest on record, second only to last year’s winter. “It’s been kind of worst-case scenario for the bulls. The utter lack of (heating) demand is, in my opinion, 99.9 percent of the natural-gas story.” To make matters worse, production has also turned around after prices shot back up.
Another unique factor to watch is the torrential rain in California. Higher water levels in the state’s reservoirs, and from larger snowpack, will help hydroelectric dams produce more electricity this summer. The result will be softer demand for natural gas in the state, another bout of bad news for gas bulls.
Natural gas is one of the most volatile commodities, so prices will continue to swing up and down. Indeed, volatility might pick up in the coming weeks on the changeover in seasons, as well as the large volume of open interest options remaining in the market. The swings in prices have attracted a lot of bets on gas prices. “Nothing gets a volatile market like natural gas going more than an overabundance of long or short positions.” It is like a game of musical chairs.
GoghGoner wrote:VMT going up and mpg going down.Sales of sedans and other cars fell to the lowest level in six years last month, while light trucks set a January record.
Users browsing this forum: No registered users and 23 guests