Updates
December 10, 2019: pay attention to this -- it's subtle but record-setting -- from a reader, see comments:
Natural gas prices for January hit an all time low a week ago Friday and beat that yesterday, a fact largely missed by the media...they don't understand prices for gas are seasonal, and while it's been lower in the summer, we've never had a January contract price fall this low...Expecting a mild winter and lots of natural gas?
I have the price graphs here: https://focusonfracking.blogspot.com/2019/12/natural-gas-prices-for-january-at-all.html.
Most recent graph: https://www.barchart.com/futures/quotes/NGF20/interactive-chart.
December 10, 2019: a heck of a response from a reader regarding this story -- :
I do not think it is yet widely recognized just how profound - and widespread - are the effects of the divergence of Henry Hub pricing (aka US production) and benchmarks for crude (WTI, Brent, amongst many).
Focusing only upon the cost/price impacts on US LNG exports, get a load of these ...
One common thread to these developments is that historical pricing for piped gas is tied to indexed crude oil pricing.
- Algeria is cutting back on piped gas exports to Europe
- Cyprus is mulling over an LNG terminal (FSRU to start) rather than commit to a short, 12 inch pipeline from the nearby Israeli gas field as the ~$5.50/mmbtu LNG price is cheaper than the ~$6/mmbtu price of the piped gas
- Singapore is on track to completely end its imports of piped gas from nearby Malaysian and Indonesian fields when contracts expire in 5 years as imported LNG will be substantially cheaper
- New, massive Siberian/China gas pipeline may not provide cheaper gas than LNG in southern regions of China due to cost of transportation
- Turkey was importing LNG via the world's largest FSRU rather than increasing purchases of Gazprom's piped gas as the LNG was almost 2 bucks/mmbtu cheaper.
As the US-centric Henry Hub pricing continues to maintain a surreal level of rock bottom numbers, traditional LNG or piped gas suppliers are simply getting rocked out of their boots. These players include Australia, Qatar, Algeria, Russia ... virtually any existing or emerging country looking to export natural gas.
Note ... just as political and social factors come into play with oil revenues vis a vis domestic monetary distribution, the natural gas producers are in the same boat.
With LNG module fabrication yards in China and Italy affiliated with McDermott, Fluor, BHGE, et al, cranking out ready-to-assemble components ...
With small and mid scale operators plunging in with innovations at blinding speed ...
It is simply incontestable to state that the global order in the energy world will see upheavals in the coming years unlike anything witnessed in years gone by.
Original Post
Link here to part 1.
This was EIA's projection back in 2009, for the 2010 report:
So, if I understand the graph correctly, back in 2010, the EIA forecast a ratio of 3 to 1 for price of oil to price of natural gas in usual methods of pricing oil and natural gas. If crude oil was trading for $60, then natural gas should be about $20.
So, how did their projections work out? Also from the EIA:
Price of oil is on the x-axis at the left (currently about $50) while the price of natural gas is on the x-axes on the right (currently about $2). And between 2010 and 2014, the spread was much wider.
The tea leaves suggest the spread may widen slightly over the next eighteen months:
- natural gas prices should come down another 25 cents;
- crude oil should increase another $2 to $5
natural gas prices for January hit an all time low a week ago Friday and beat that yesterday, a fact largely missed by the media...they don't understand prices for gas are seasonal, and while it's been lower in the summer, we've never had a January contract price fall this low...
ReplyDeletei have the price graphs here: https://focusonfracking.blogspot.com/2019/12/natural-gas-prices-for-january-at-all.html
Much appreciated; I will post those later. Bruce.
Deletehere's the latest on those graphs: https://www.barchart.com/futures/quotes/NGF20/interactive-chart
Deleteinteractive, so you can pick whatever period you'd want to show...
sorry for not getting back with that sooner, but i've been out...
Expecting a mild winter and lots of natural gas?
Deletegeez, i dont know; the forecast two weeks out changes every few days..
Deletethat big draw three weeks ago had me thinking we might have a larger winter drawdown than normal for the weather, but the past few weeks have shown otherwise...if production holds near the record levels we've seen recently, anything but the coldest of winters would mean we'll head into spring with a big surplus...then i'd imagine by summer we'll start hearing stories about running out of storage space, like we heard with oil three years back..
To your point, the roughnecks are experiencing some record cold weather, and it's still eleven days until winter:
Deletehttp://themilliondollarway.blogspot.com/2019/12/a-shout-out-to-bakken-roughnecks-being.html.
that highlights another problem with trying to forecast natural gas supplies....we could have record cold on the high plains all winter and not put much of a dent in supplies, but a modestly cold east coast, where 40% of the consumption takes place, would mean a big drawdown...
Delete.. and such anecdotal data can really mislead retail investors.
Delete