Wednesday, September 5, 2012

Hurricane in the Gulf and the Price of Natural Gas Just Yawns

It used to be that a hurricane entering the Gulf of Mexico - even a measly old Cat 1 storm - would cause price surges and general chaos in the natural gas markets.  Remember the fall of 2005?  Now the news of  3.5 Bcf/day of shut in gas barely elicits a yawn from a pricing perspective.


To say that natural gas prices were not impacted by Hurricane Isaac's arrival is the understatement of the year.

7 comments:

Anonymous said...

Wow. Not sure how rational markets really are, but if that's the case it could be a really long time before any rise in prices.

Anonymous said...

It's interesting to see weather events not cause a price spike.

This scenario is one reason why John Arnold of Centaurus Advisors, LLC shut down his natural gas fund; market is more predictable and less vulnerable to big swings.

Robert Hutchinson said...

Agreed. In terms of enticing end users to depend on natural gas, I think the lack of volatility is a bigger selling point than low price. I'm waiting for someone to articulate that argument on a wider scale.

Anonymous said...

I predict within a decade that GOM hurricanes will cause price drops for the following reasons.
1. greater percentage of NG produced onshore.
2. greater % of LNG exported thru the GOM which hurricanes would shut down.
3. hurricanes are natures cooling machine an as more power is produced by NG, the lose of power consumption due hurricane destruction and the natural cooling that hurricanes provide will decrease NG consumption.

Robert Hutchinson said...

1,2,3:

I agree that the LNG export issue will cause issues. Given that it will be under contract and the backed up gas will be spoken for, I'm not sure how it will impact spot price.

Also, power outages certainly cut into demand, especially with outages, but again tough to quantify.

Anonymous said...

Where is this chart from? Do you have a link to the source? It's a great graph!

Robert Hutchinson said...

I created it myself. And thanks.

Do you want the source data? You can email me at haynesvilleplay (at) gmail (.com)