Friday, January 6, 2012

Ugly Start for Gas Prices

This new year started with a thud for natural gas prices, as the red line on the chart below illustrates.  Considerably worse than past (unimpressive) years.


Given the market conditions and the current high level of storage, don't look for the January spike in prices we've seen in past years.  I hate to say it, but gas fans need to pray for a new (albeit temporary) Ice Age.  Or at least a few big, well placed cold snaps.

4 comments:

Anonymous said...

I feel like cold winters in 2010 and 2011 allowed drillers to be undisciplined.

The problem is over-supply; we might need a very warm winter to force companies to make uncomfortable choices, and put down rigs. I really see that as the path to higher prices - fiscal austerity brought on by low cash flows.

Bill Mendenhall said...

Well said. It will be interesting to see whether the completion of HBP drilling here in the Haynesvillewill have an effect on overall production during 2012. One report this week indicated that the current 802 rig count needs to drop to 750 before the reduction will boost prices.

Robert Hutchinson said...

Anonymous: I responded in a separate post on the site. Bottom line: I've lost faith in the austerity argument after having touted it myself for several years.

Robert Hutchinson said...

Bill:

In terms of the Haynesville, the big question is what does Haynesville production look like in 6 months or 12 months after half of the rigs in the play disappeared over the course of 2011? And will that make a difference in overall supply with the other shale plays cranking out gas?