Monday, November 14, 2011

Natural Gas Prices at 10-Year Low for November

WSJ Blog -- "Home heating costs for many Americans will be lower this year. Natural gas futures closed on Friday at $3.58 for a million British thermal units, down 20% from early June (see chart, data here). In a typical November, natural gas prices start rising in anticipation of higher demand, but this year a supply glut is weighing on the market. It has been 10 years since prices were this low heading into the winter."

MP: The chart above shows inflation-adjusted natural gas futures prices back to 1994.  November futures prices of $3.58 are 14% below a year ago, 39% below two years ago, about half of the price in November 2008 of $7.13 and well below the average real price of natural gas futures contracts over the last decade of $6.73.  Welcome to the shale gas revolution.     

8 Comments:

At 11/14/2011 9:14 AM, Blogger IT STANDS TO REASON said...

Suddenly one of the major component costs of manufacturing has been cut in half. This could be a great opportunity for the USA provided the government doesn't blow it

 
At 11/14/2011 9:18 AM, Blogger VangelV said...

MP: The chart above shows inflation-adjusted natural gas futures prices back to 1994. November futures prices of $3.58 are 14% below a year ago, 39% below two years ago, about half of the price in November 2008 of $7.13 and well below the average real price of natural gas futures contracts over the last decade of $6.73. Welcome to the shale gas revolution.

Reality check. Most of the shale producers can't make money at less than $8 gas. Why would they keep producing if they are getting $3.58? And if they keep producing how many bankruptcies are you expecting to see in the next year?

 
At 11/14/2011 11:26 AM, Blogger Benjamin said...

Runaway inflation! Execute Ben Bernanke! Buy gold! Genuflect to gold!

Vange-

Remember, wells shut in when the marginal revenues are below the marginal costs. It may have been unprofitable to drill a well, but it keeps producing as long as it generates a revenue stream greater the ongoing costs of operation.

And people keep getting better and better at drilling. Some say the USA goes energy independent in 10 years.

We would have gluts of oil now Iraq, Iran and Venezuela were normal countries.

What is amazing is how much of the world's oil is locked in nuthouse-nations, and we still have plenty.

 
At 11/14/2011 11:55 AM, Blogger Unknown said...

The profitability of shale gas is more complicated than than some people realize.

The PROPER Way to Evaluate the Economics of Shale Plays

 
At 11/14/2011 1:11 PM, Blogger rjs said...

price of gas better not go up too much:

http://oilprice.com/Alternative-Energy/Wind-Power/Wind-Power-to-be-Competitive-with-Natural-Gas-by-2016.html

 
At 11/14/2011 1:48 PM, Blogger VangelV said...

Remember, wells shut in when the marginal revenues are below the marginal costs. It may have been unprofitable to drill a well, but it keeps producing as long as it generates a revenue stream greater the ongoing costs of operation.

Correct. But most shale wells do not produce very much oil and gas after the first year or two. To keep the production profile as it is you need many more unprofitable wells to continued to be drilled. That makes no economic sense.

And people keep getting better and better at drilling.

We have been drilling these type of wells for more than 25 years. Most of the gains have already been realized and any further progress is likely to be incremental.

Some say the USA goes energy independent in 10 years.

And not that many years ago some were saying that Pets.com would make great returns over the next ten years. Skeptics like me were told that we did not get "IT" whatever "IT" was right up until the bubble burst. For anything that is predicted to come true we will have to see positive returns on the energy (and capital) that are being invested.

We would have gluts of oil now Iraq, Iran and Venezuela were normal countries.

And if pigs could fly all of us would be pilots. We live in the real world Benji, not in your utopian fantasy. Here the 10-K filings actually matter and serious people care if the EURs are accurate.

What is amazing is how much of the world's oil is locked in nuthouse-nations, and we still have plenty.

What is amazing is that you still cannot see the forest from the trees.

 
At 11/14/2011 1:53 PM, Blogger VangelV said...

The profitability of shale gas is more complicated than than some people realize.

The PROPER Way to Evaluate the Economics of Shale Plays


What a bunch of crap. Why not just look at the 10-K filings and ask management about their funding gaps? Ask why if these companies are so profitable they can't self finance operations and need to keep getting loans of selling off assets in order to keep the lights on.

http://oilprice.com/Alternative-Energy/Wind-Power/Wind-Power-to-be-Competitive-with-Natural-Gas-by-2016.html

Does anyone really believe this crap? The wind industry in the UK has caused prices of energy to explode and is leading to consumer protests that will ultimately lead to major bankruptcies as the agreements and subsidies are ended. The link is a fishing expedition looking for another fool.

 
At 11/14/2011 3:17 PM, Blogger Benjamin said...

Vange-

There must be 24-30 mbd in Iran, Iraq and Venezuela, in low-hanging fruit.

Iraq is talking 12 mbd alone, and who knows if they can do it. It won't be geology that thwarts them.

Peak Oil came and went with a whimper.

The price signal works miracles.

 

Post a Comment

Links to this post:

Create a Link

<< Home