Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
INTEL (INTC) Stock Investing in AI Machine Intelligence Mega-trend 2020 and Beyond - 18th Jan 20
Gold Stocks Wavering - 18th Jan 20
Best Amazon iPhone Case Fits 6s, 7, 8 by Toovren Review - 18th Jan 20
1. GOOGLE (Alphabet) - Primary AI Tech Stock For Investing 2020 - 17th Jan 20
ERY Energy Bear Continues Basing Setup – Breakout Expected Near January 24th - 17th Jan 20
What Expiring Stock and Commodity Market Bubbles Look Like - 17th Jan 20
Platinum Breaks $1000 On Big Rally - What's Next Forecast - 17th Jan 20
Precious Metals Set to Keep Powering Ahead - 17th Jan 20
Stock Market and the US Presidential Election Cycle  - 16th Jan 20
Shifting Undercurrents In The US Stock Market - 16th Jan 20
America 2020 – YEAR OF LIVING DANGEROUSLY (PART TWO) - 16th Jan 20
Yes, China Is a Currency Manipulator – And the U.S. Banking System Is a Metals Manipulator - 16th Jan 20
MICROSOFT Stock Investing in AI Machine Intelligence Mega-trend 2020 and Beyond - 15th Jan 20
Silver Traders Big Trend Analysis – Part II - 15th Jan 20
Silver Short-Term Pullback Before Acceleration Higher - 15th Jan 20
Gold Overall Outlook Is 'Strongly Bullish' - 15th Jan 20
AMD is Killing Intel - Best CPU's For 2020! Ryzen 3900x, 3950x, 3960x Budget, to High End Systems - 15th Jan 20
The Importance Of Keeping Invoices Up To Date - 15th Jan 20
Stock Market Elliott Wave Analysis 2020 - 14th Jan 20
Walmart Has Made a Genius Move to Beat Amazon - 14th Jan 20
Deep State 2020 – A Year Of Living Dangerously! - 14th Jan 20
The End of College Is Near - 14th Jan 20
AI Stocks Investing 2020 to Profit from the Machine Intelligence Mega-trend - Video - 14th Jan 20
Stock Market Final Thrust - 14th Jan 20
British Pound GBP Trend Forecast Review - 13th Jan 20
Trumpism Stock Market and the crisis in American social equality - 13th Jan 20
Silver Investors Big Trend Analysis for – Part I - 13th Jan 20
Craig Hemke Gold & Silver 2020 Prediction, Slams Biased Gold Naysayers - 13th Jan 20
AMAZON Stock Investing in AI Machine Intelligence Mega-trend 2020 and Beyond - 11th Jan 20
Gold Price Reacting to Global Flash Points - 11th Jan 20
Land Rover Discovery Sport 2020 - What You Need to Know Before Buying - 11th Jan 20
Gold Buying Precarious - 11th Jan 20
The Crazy Stock Market Train to Bull Eternity - 11th Jan 20
Gold Gann Angle Update - 10th Jan 20
Gold In Rally Mode Suggests Commitment of Traders (COT) Data - 10th Jan 20
Disney Could Mount Its Biggest Rally in 2020 - 10th Jan 20
How on Earth Can Gold Decline During the U.S. – Iran Crisis? - 10th Jan 20
Getting Your HR Budget in Line - 10th Jan 20
The Fed Protects Gamblers at the Expense of the Economy - 9th Jan 20
Last Chance to Get Microsoft Windows 10 for FREE! - 9th Jan 20
The Stock Market is the Opiate of the Masses - 9th Jan 20
Is The Energy Sector Setting Up Another Great Entry? - 9th Jan 20
The Fed Is Creating a Monster Bubble - 9th Jan 20
If History Repeats, Video Game Stocks Could Soar 600%+ - 9th Jan 20
What to Know Before Buying a Land Rover Discovery Sport in 2020 - 8th Jan 20
Stock Market Forecast 2020 Trend Analysis - 8th Jan 20
Gold Price at Resistance - 8th Jan 20
The Fed Has Quietly Started QE4 - 8th Jan 20
NASDAQ Set to Fall 1000pts Early 2020, and What it Means for Gold Price - 8th Jan 20
Gold 2020 - Financial Analysts and Major Financial Institutions Outlook - 8th Jan 20
Stock Market Trend Review - 8th Jan 20

Market Oracle FREE Newsletter

Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

Natural Gas Glut 2012

Commodities / Natural Gas Jan 18, 2012 - 11:28 AM GMT

By: Roger_Conrad

Commodities Not since the late 1990s have natural gas prices been this low in the dead of winter. That includes the aftermath of the 2008 crash, when oil bottomed briefly under USD30 a barrel. US inventories of the clean fuel hit a record of 3.852 trillion cubic feet in November and remain at a record for December, 11.4 percent above year-earlier levels.

Heating demand that’s nearly 20 percent below normal so far this season is at least partly to blame. Roughly half of Americans heat their homes with natural gas. This shortfall has been offset somewhat by a jump in gas’ share of electricity generation to nearly 30 percent from an average of only about 20 percent in recent years.


Gas is increasingly popular with utilities and other power generators because it’s a quick way to get into compliance with tightening US Environmental Protection Agency (EPA) regulations on emissions of mercury, particulate matter and acid rain-causing gases. Gas-fired plants also emit less than half the carbon dioxide per kilowatt of power produced, they’re easy and economic to scale up quickly and they’re the best way to ensure adequate backup capacity in case notoriously erratic wind and solar plants don’t produce as expected.

In addition, gas is for the first time a much cheaper fuel than its arch rival coal. The latter’s price has benefitted from robust demand in countries such as China and India, which are still constructing huge new coal-fired power plants at a rapid clip.

All that’s likely to keep power companies in North America “dashing” for gas and demand for the fuel rising. Meanwhile, efforts to boost natural gas’ use for transportation are moving forward, providing another potentially major source of demand.

Finally, several new projects are underway to export natural gas to the rest of the world. One of these is a venture between Progress Energy Resources Corp (TSX: PRQ, OTC: PRQNF) and Malaysian national oil company Petronas. The latter is not only bankrolling Progress Energy’s efforts to expand gas production from a third-quarter 2011 rate of 42,900 barrels of oil equivalent per day (boe/d) to 100,000-plus by 2015. It’s funding the planned construction of a liquefied natural gas (LNG) export terminal, one of five such projects in various stages of development on British Columbia’s West Coast.

Encana Corp (TSX: ECA, NYSE: ECA), Shell Canada and Apache Canada are also funding projects in BC. Meanwhile, Dominion Resources (NYSE: D) is moving to equip its Cove Point, Maryland, LNG import terminal for exports, which would unlock Marcellus shale output for global shipping. So is Cheniere Energy Inc (NYSE: LNG), though its ability to bring a deal to fruition is in doubt due to extreme financial weakness and a recent 39 percent boost in projected project costs.

In short, demand for North American natural gas is on the rise and looks set to stay that way for years to come. Unfortunately for producers, rising usage--however impressive--is dwarfed by mushrooming supplies and production, made possible by the shale energy revolution.

According to the Energy Information Administration, US production of dry natural gas rose from 18.504 trillion cubic feet in 2006 to more than 23 trillion cubic feet in 2011.

That was partly offset by a drop in Canadian natural gas production from 6.6 trillion cubic feet in 2006 to 5.4 trillion in 2010. But here, too, volumes have started to pick up, as producers have discovered the joys of producing from shale, with BC leading the way and Alberta surging as heretofore untapped sources are exploited.

The key area so far has been the Montney Shale, which has spurred large output at several companies, including ARC Resources Ltd (TSX: ARX, OTC: AETUF). ARC and others have also set their sites on liquids-rich gas opportunities in Ante Creek and Pembina in Alberta, Parkland in BC and Goodlands in Manitoba. And many believe the Horn River Shale play will wind up dwarfing even these prolific finds.

All this gas is much less valuable to produce at sub-USD3 prices than it would be at USD5. One reason gas producers haven’t yet pulled in their horns is most have substantial hedge positions that lock in prices for much of their output at least through 2012. That alone is expected to keep North American output of gas growing next year, further boosting supplies.

Roger Conrad is the preeminent financial advisor on utility stocks and income investing. He is the editor of Big Yield Hunting, Australian Edge, and Canadian Edge, as well as Utility Forecaster, the nation's leading advisory on electric, natural gas, telecommunications, water and foreign utility stocks, bonds and preferred stocks.

Mr. Conrad has a track record spanning three decades, delivering subscribers steady double-digit gains of 13.3% annually since 1990. And he’s done it all with a focus on capital preservation and risk minimization by investing in big dividend stocks including Canadian Income Trusts, high-yield REITs, MLP investments, among many others.

Mr. Conrad has a Bachelor of Arts degree from Emory University, a Master's of International Management degree from the American Graduate School of International Management (Thunderbird), and is the author of numerous books on the subject of investing in essential services, including Power Hungry: Strategic Investing in Telecommunications, Utilities and Other Essential Services

© 2011 Copyright Roger Conrad - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules