Thursday, May 20, 2010

Storage: +76 Bcf to 2.165 Tcf

The gas market may have caught a little break this week, as the EIA weekly working gas in storage report showed a 76 Bcf increase, bringing the gas in storage to 2.165 Tcf.  This injection figure favorably compares to this week last year (+100 Bcf) and the five year average (+93 Bcf).  The current storage levels are still 3.5% higher than last year and 16.6% higher than the five year average.


wfran15 said...

Sure you've already recieved a bunch of emails, but wondering if you planned on weighing in on Henry Groppe's doubling in the price of Nat Gas comments...
watch the first couple minutes of the video title Energy Update on April 16th.

He's kind of echoeing Berman's view which seems to be bullish for prices. I think it will in turn let these independents hold more acreage via drilling bc the rig count will start to escalate with higher prices. Should be good for the CHK and HK's of the world so they can get there stuff HBP'd before they have to start paying for lease extensions in mid 2011 at mid 2008 prices.

Robert Hutchinson said...

You are the first - thanks for the tip. Interesting perspective. He believes gas is fundamentally undervalued and he downplays the potential for shale from the non-Barnett plays.

I won't go head-to-head with an expert like Henry Groppe, but I wonder if he isn't dismissing the potential production from the new shale plays too much. If you see the rig count double in the Marcellus in the next couple of years, as many are expecting, that would equate to lots of new gas. If the price jumps by a buck or two, you will definitely see more rigs in the Haynesville. Those would be short-term production increases.

His main point is that traditionally-derrived gas sources have peaked, but with the shale boom and the low prices, they are probably being neglected at this time. I have the feeling that if prices creep up, increased production will follow from all sources and pull the prices lower, sort of a push-pull battle.

If there is a fundamental shift in consumption - i.e. greater use in power generation or transport fuel - I think a price increase is inevitable. I'd love to see prices double (and sustain), but I'm not sure how realistic that is in the very near future (i.e. in time for CHK and HK HBP everything in sight).

My opinion.