Thursday, December 22, 2011

NG Price Outlook Still Gloomy

I've always considered prognosticating the future price of anything to be a fool's errand, but it doesn't stop analysts from lining up to put forth their best guess.  In a survey of gas analysts by Bloomberg, most believe that natural gas prices will continue their steady decline from 2008 and be lower in 2012 than 2011, with most analysts predicting average prices below $4/MMBtu next year.

The bottom line is that production continues to increase even though there are fewer and fewer gas-targeted rigs operating.  The good news is that demand is starting to pick up in the manufacturing and industrial sectors, but it is not at the pace of increasing supply, which will continue to put downward pressure on price.  A slow economic recovery just can't keep up with production increases.  Also good news is increased export activity to Canada, although not enough to make a huge difference in the oversupply picture.

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