Thursday, September 13, 2012

Away From the Cliff

As a reader pointed out to me a couple of months ago, one of the biggest business stories of the year (at least in the energy industry) has got to be the recovery of natural gas storage levels.  In April 2012, the level of gas in storage was 60.5% higher than the five year average.  Today's EIA working gas in storage report put that figure at 9.0%, which is a pretty amazing recovery in a period of five months.  It is particularly remarkable given the abundance of shale gas and the relative ease in bringing in big, big wells in relatively short order. 

Don't understate the self-control exhibited by producers to lay down drilling rigs and limit production.  Will this lead to higher prices?  Maybe a little bit, but until you see fundamental demand pick up in the U.S. I think you will see a lot of downward pressure around the point where big shale fields become financially viable.  But it's still good news for natural gas.

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