Not sure about you but we have enjoyed the thousands in savings this year on the Natural Gas bill! Stay low!!
via The Financial Times
Natural gas prices fall on mild US winter
US natural gas prices suffered their biggest week drop in two-and-a-half
years, falling 12.7 per cent, amid forecasts of continuing mild winter weather
and booming US production.
Higher than normal temperatures in the east and Midwest of America have depressed
US natural gas prices over the past few months, when consumption is supposed
to be at its strongest. “There doesn’t seem to be a floor [to the price] right
now,” said Laurent Key, natural gas analyst at Société Générale in New York.
Just over half of US households use natural gas for heat, and while January
is supposed to be the coldest month of the year, stocks in storage could this
month rise as high as 21 per cent more than normal, Mr Key noted.
The mild weather has come as US production has been growing rapidly on the
back of the shale boom, caused prompted by the development of resources that
were previously uncommercial. According to the US Department of Energy, natural
gas output in October, the latest month for which data are available, marked a
record high.
Nymex February natural gas futures traded at $2.66 per million British
thermal units on Friday, the lowest level since September 2009.
While the downward trend in prices is eventually expected to make it
unprofitable to produce natural gas, and lead to production cutbacks, many gas
wells also produce higher-value liquids such as petroleum. For some producers,
the cost of pumping natural gas is virtually “zero”, according to
analysts.
With stocks expected to remain high even if temperatures suddenly turn
colder than normal, many analysts expect prices to fall further. “The market
fears a collapse in prices below $2 per mBtu, which cannot be ruled out,” noted
Barclays Capital.
Amid such bearish sentiment, investor bets on further declines have been
rising. The total number of Nymex natural gas futures contracts outstanding,
known as open interest, rose to a record 1,115,469 lots on Thursday, up by a
third in the past year and 10 per cent in the past week. The combination of
rising open interest and falling prices generally indicates that traders and
investors have added to their short positions.
However, Anthony Yuen, analyst at Citigroup, cautioned that “a bullish
weather report could be a catalyst”, noting positive news could prompt a
scramble for investors to cover their positions. The market could also
eventually turn as producers cut the number of rigs, said Mr Yuen. The number of
rigs deployed to drill for gas has fallen to 791 from a recent peak of 936 last
October, according to Baker Hughes, and a continued decline could affect
longer-term contracts.
