In Its Most Recent Analysis, Energy Solutions, Inc. Identifies Why the Downtrend for Natural Gas Prices Will End in 9-12 Months
For the past two years, natural gas production levels have exceeded natural gas demand. This imbalance has driven natural gas prices sharply lower. However, today, natural gas prices are about much more than just supply and demand. According to Natural Gas Price Outlook, an educational analysis from Energy Solutions, Inc., one reason production has continued to rise is because forward hedges secured in 2009 insulated natural gas producers from falling natural gas prices. In addition, some natural gas producers have been forced to continue to drill even at a loss because of land lease requirements.
However, Natural Gas Price Outlook paints a different picture for 2011 and 2012. Natural gas producers are expected to become increasingly sensitive to weaker natural gas prices because of fewer forward price hedges, the expiration of land leases, reduced capital infusions from foreign investors and growing concerns of an oversupply of natural gas liquids, an economical byproduct of natural gas production. This sensitivity will be heightened if quantitative easing (QE2), as proposed by the Federal Reserve, begins to stimulate natural gas demand. Natural Gas Price Outlook also warns that the severity of a price momentum change will be impacted further if speculative players shift from a selling to a buying mentality. Overall, by 2012, natural gas prices are projected to return to a $5-$6 per MMBtu price range.
In addition to reviewing the significant growth of onshore shale production, Natural Gas Price Outlook evaluates problems that could surface because of reduced diversification of supply sources. Increased well freeze-offs, new regulations limiting natural gas drilling, and the demise of an Alaskan or Canadian Pipeline are just three areas of concern. The increased potential for the nation to become a major exporter and the replacement of older, less efficient coal-fired electric generation facilities with natural gas-fueled generation will also create complexities for the nation’s natural gas market.
Natural Gas Price Outlook provides buyers and sellers of natural gas with a thorough and comprehensive review of numerous market factors that will impact natural gas prices in 2011 and 2012. This analysis is written by Valerie Wood, President and Owner of Energy Solutions, Inc., an industry veteran with more than 26 years of natural gas expertise. To learn more, go to www.naturalgasoutlook.com, view an Executive Summary, or call Kelly Gilboy at (608) 848-9589.
Formed in 1996, Energy Solutions, Inc. is independently owned. With combined experience of more than 50 years in the natural gas industry, our team focuses on helping businesses better understand the natural gas industry in order to improve their competitive edge.