free html hit counter Peak Oil Debunked: 303. SOARING NATURAL GAS INVENTORIES

Friday, May 12, 2006

303. SOARING NATURAL GAS INVENTORIES

Gas Prices Tumble to Near One-Year Low
Natural Gas Prices Decline to Their Lowest Level in Almost a Year Amid Soaring Inventories

WASHINGTON (AP) -- Natural gas futures declined to their lowest level in almost a year on Friday amid soaring inventories of the mostly domestic fuel used to heat homes and produce electricity.

Analysts said the price of natural gas could fall even further in the months ahead, given relatively weak demand and expectations of rising supplies, though they cautioned that production in the Gulf of Mexico remains hindered by damage from last year's powerful hurricanes Katrina and Rita.

"Unless we have a repeat of last summer's hurricane season, we're going to have so much (natural) gas in storage by September that we won't have anywhere to put it," said Daniel Lippe of Petral Worldwide Consulting in Houston.Source
-- by JD

22 Comments:

At Saturday, May 13, 2006 at 4:39:00 AM PDT, Blogger Dom said...

Wow!
That will help me heat my house this summer!

 
At Saturday, May 13, 2006 at 5:22:00 AM PDT, Blogger bc said...

JD, you doing exactly what you accuse the doomers of doing! Trawling the newsfeeds for any snippets that appear to favor your argument. Don't be tempted to play their game, your blog is better than that.

 
At Saturday, May 13, 2006 at 8:22:00 AM PDT, Blogger Fernando said...

Do we assume that you agree with these predictions?

 
At Saturday, May 13, 2006 at 10:28:00 AM PDT, Blogger Paul Ramsey said...

Forecasts call for a long hot summer this year, with the concommitant demand on electricity (which "clean, modern" NG is used to produce increasingly). So things might not be as rosy as painted in this article.

Also, much of the good news is not in production going forward, but in storage currently filled, due to the very warm winter this year (yeah, global warming, what a crock!). Check out the storage graph for North American NG.

The fact remains that rig counts are through the roof, but production is not. If the spot price comes down and NG producer stocks fall, consider it a good buying opportunity, because North American NG is only going to become more dear.

 
At Saturday, May 13, 2006 at 11:45:00 AM PDT, Blogger bc said...

fernando said...

Do we assume that you agree with these predictions?

Do you mean me or JD? And never assume anything!!!

This type of "news" is just media chatter, it doesn't merit close analysis, which is like the point JD has made elsewhere* (and I agree with).

All this media/analyst blathering amounts to is "if supply stays high then prices will go down unless something affects supply, in which case prices will go up". That is not prediction, it's just stating the bleeding obvious!

If it helps to analyze the analyst's "prediction", forecasters are predicting another bad year for hurricanes, and I have absolutely no reason to say they are wrong.

* On peakoil.com, in his 'retirement' thread "suckling at the tit of media hype which nourishes you with reassuring messages". Great quote!

 
At Saturday, May 13, 2006 at 8:17:00 PM PDT, Blogger Joe said...

Paul,

"The fact remains that rig counts are through the roof, but production is not"

A stupid question here...

If I was a Natural Gas producer and demand was going down and there was huge amount of gas in storage, why would I produce more? Who would use it? If there was no market for it, where would it go if storage tanks get full?

 
At Saturday, May 13, 2006 at 10:25:00 PM PDT, Blogger Freak said...

Would I be wrong to assume that it is increasingly harder to store natural gas as temperatures increase through the summer?

 
At Sunday, May 14, 2006 at 1:50:00 PM PDT, Blogger Dom said...

freak,

just shut in the wells, if you think you'll get a better price for it in the not-too-distant future. Of course, that doesn't help storing it as LNG.

 
At Sunday, May 14, 2006 at 1:54:00 PM PDT, Blogger Dom said...

Did you also know that commodity markets are about ready to crash?!

"Merrill Lynch recently compared the surge in the prices of commodities such as copper, which are traded on investment exchanges, with the likes of steel or rubber, where it is much harder to take a position through the financial markets, and concluded that the level of speculative interest was 'unprecedented'.

That seems to be the case in copper, and certainly is the case in oil. The price of crude always drops as we come out of winter because consumption in the US is significantly lower in the summer months. Not this year though, despite there being more than enough production to meet current demand."

The prices are just unsustainable.
Nowhere to go but down.
Really.
No, really!!!

 
At Sunday, May 14, 2006 at 11:38:00 PM PDT, Blogger DC said...

Monday will be a very interesting day on the markets. Based on what happened at the end of last week, the possibility of contagion is real. It seems that investors are suddenly searching for a safe haven.

 
At Sunday, May 14, 2006 at 11:50:00 PM PDT, Blogger Dom said...

bc,
now on a serios note - bought a put about a month ago on DAX, figured we were about at the top, but you know how that is with the timing.

Now it's downhill (doubt there will be new highs, though short "recoveries" are certain) at least til first of Oktober. Do you think we'll recover after that? (the famous fifth leg)

 
At Monday, May 15, 2006 at 7:00:00 PM PDT, Blogger NG Train said...

You guys are missing the real story of what is going on. Spot prices for Natural are appx. $6, but the price betweeen summer and winter gas is almost $5. The Cash Market is oversupplied with gas causing the front end of the market to become depressed. The problem with the bull arugment for the summer though is that pretty much no matter what happens, we are going to fill storage to capacity earlier than we ever have. Last summer was blazingly hot and we still had no problem filling storage. This year we are 500 bcf ahead of storage number from last year's already bloated numbers.
While the total storage capacity of the US system is unknown, the smart money would suspect that it is around 3.5-3.7 tcf. People concerned with high natural bills should praise the speculator as most of the speculative money is short natural right now.
When it comes to the winter though, its a crap shoot. If we get an early and sustained cold snap, the market is going to explode.
To answer the question why a producer would continue to produce if prices were forecasted to be higher in the future, well the marginal cost per mmbtu of gas is very low. In some parts of the country it is as low as $2.50. "expensive" gas is around $5, so it still pays to pump every last MMbtu.
Further out the curve though, the conusmer should be nervous, Cal 2007 and Cal 2008 gas are roughly $10 and $9.50 respectively.

 
At Monday, May 15, 2006 at 8:34:00 PM PDT, Blogger totallyrandom_not said...

Off topic here, but I found this interesting book available as a free download

http://www.oilendgame.com/ReadTheBook.html

Amazon sells the hard copy for $40. Worth at least a quick look for anyone interested in peak oil.

 
At Monday, May 15, 2006 at 10:13:00 PM PDT, Blogger Mel. said...

If you dug that book, I'd suggest doing more research on Amory Lovins and his writings regarding PO. He's one of the few old-guard minds who seems to actually be using some rational hope in his outlook, as opposed to the death-to-the-next-generation rhetoric.

 
At Tuesday, May 16, 2006 at 3:48:00 AM PDT, Blogger St Peter's RC High School said...

Freak said...

"Would I be wrong to assume that it is increasingly harder to store natural gas as temperatures increase through the summer"

Yes you would.

In the USA natural gas is stored in geological trap structures which are not affected by above ground temperatures.

 
At Tuesday, May 16, 2006 at 4:26:00 AM PDT, Blogger bc said...

So, I think JP Morgan said it best..."prices will fluctuate".

 
At Tuesday, May 16, 2006 at 8:32:00 PM PDT, Blogger Joe said...

ng train said: "To answer the question why a producer would continue to produce if prices were forecasted to be higher in the future, well the marginal cost per mmbtu of gas is very low. In some parts of the country it is as low as $2.50. "expensive" gas is around $5, so it still pays to pump every last MMbtu.'

So ng_train... are you saying that producers are producing every last bit of gas that they can right now and that they always do? Is production the same every month?
It sounds like you are saying that as long as gas stays above $2.50, producers will produce as much as possible, even if demand drops. huh? So even though demand is = let's say a qty of 50, they will keep producing 100 if they can. Is that what you are saying?

 
At Tuesday, May 16, 2006 at 11:32:00 PM PDT, Blogger Mel. said...

LOL. They're going to need a bigger boat, if that's the case.

 
At Friday, May 26, 2006 at 8:18:00 PM PDT, Blogger Paul Ramsey said...

Some great NG numbers available from EIA. In particular the big table of "marketed production" (the stuff actually sold) is interesting.

 
At Sunday, June 11, 2006 at 8:26:00 AM PDT, Blogger Override367 said...

High energy prices are the only way the public will ever change, I was a little dismayed to see gas drop about 20 cents here last week.

Americans won't do things such as moving closer to their job until it becomes economical to do so, we're still only spending a small percent of our collective incomes on gasoline.

NG will go up due to having to import liquid NG, we got quite a ways to go before NG peaks (I have a feeling not for at least 5 years after oil does)

 
At Friday, June 23, 2006 at 2:51:00 AM PDT, Blogger cynic boy said...

^^I agree with the poster above,everytime the energy prices drop
the sheeple feel smug again and continue their non-thinking consumer lifestyles,and all the cliched activities that go along with it like dirtbike riding,jetsking,powerboating etc,etc,not to mention 150 mile round trips to their Mcjobs.
Bring on the $100+ a barrel oil and soon!!

 
At Thursday, September 28, 2006 at 7:16:00 PM PDT, Blogger Dr Strangelove said...

The EIA is using an erroneous formula to estimate natural gas inventories. The formula grossly overestimates. Although this may help keep prices lower and republicans in charge, the long term effects may be devastating. Some small suppliers may have to cap wells, drilling and exploration for natural gas will decline. Suppliers with low inventories may not purchase enough for the winter, thinking that their competitors are well supplied.

http://members.triton.net/daveb/NaturalGas.pdf

 

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