Post by jeffolie on Jan 6, 2013 11:49:02 GMT -6
peak oil fails
MORE CRUDE DRILLING LIKELY
The glut of nat gas and its forms saturated the supply demand market to the point where a shift in production from drilling for nat gas to drilling for American oil appears more likely to increase crude supplies from more drilling.
" ... "Now with the weakness in NGLs, there may be further refinement toward crude drilling,"
DECLINING PRICES FOR ENERGY
GLUT and low nat gas prices appear to confuse peak oil advocates in DENIAL that price could fall significantly.
DEMAND TO DECLINE
If I am correct that the most common American will spend a bit less in 2013 than 2012 because of the 2% increase in payroll tax associated with SS, then a declining US GDP will mean energy demand will decline. No hope of an EU increase in GDP and demand for energy appears likely. China's demand and growth rate has slowed as its vendor financed exports to the EU & US can not increase if spending continues to decline.
===============================================================
JANUARY 5, 2013 What Might End the Gas Glut
If prices of associated liquids stay low, energy producers will cut gas output, squeezing supplies.
The natural-gas market is starting this year much as it did the last, oversupplied, with prices lower due to unseasonably mild weather. But there's one important difference: Prices of key natural-gas liquids are much lower now.
In fact, the price of these liquids, such as ethane and propane, can be used as a barometer of the prospects of their cousin, natural gas. Natural-gas liquids, or NGLs, are pulled up at many gas wells and earlier last year had been fetching enough cash to make the wells worth drilling, despite abundant supplies of natural gas, which sent that fuel to 10-year lows in 2012.
Natural gas has fallen on forecasts for warmer-than-normal temperatures in some major heating markets. Producers have been hoping for frigid temperatures that would prompt homeowners to burn through winter stockpiles. On Friday, the U.S. Energy Information Administration said that despite the winter's largest drawdown in the week ended Dec. 28, supplies remain at record highs for this time of year.
Despite flagging prices, production of natural gas continues to surge. On Jan. 7, the agency is scheduled to reveal how much gas was pumped out of the ground in October. September output set a new shale-era record at 73.05 billion cubic feet per day, according to the EIA.
Last week, natural-gas futures for February delivery ended at $3.287 per million British thermal units on the New York Mercantile Exchange, a 15.8% drop since they hit a 2012 high of $3.903 per million BTUs in late November.
HIGH PRICES FOR NGLS had encouraged drilling, swelling natural-gas output. However, that support is disappearing. Only a few months after gas prices hit their 10-year low, producers were flooding the markets with ethane, a building block of plastics, and propane, a fuel often used in heating and cooking.
Since then, NGL prices have nose-dived.
Ethane at the Mont Belvieu, Texas, trading hub, fetched 22.75 cents per gallon Friday, down from nearly 90 cents a year ago, and near an 11-year-low, according to Platts research. The price is so low that some companies can't justify the cost of separating ethane from natural gas, further boosting gas supplies. Propane prices are also in the dumps, trading at 87.2 cents per gallon at Mont Belvieu near the end of the week, 62.2% below the year-earlier level, according to the EIA.
Low NGL prices eventually may end the natural-gas glut. Without satisfactory profits on natural-gas liquids, energy companies will shift their focus from gas to oil. "Now with the weakness in NGLs, there may be further refinement toward crude drilling," says Jeff Dietert, an analyst with Houston investment bank Simmons.
Indeed, some big energy producers, including Occidental Petroleum (ticker: OXY), EOG Resources (EOG), and Marathon Oil (MRO) are rethinking drilling plans. Marathon CEO Clarence Cazelot told investors at a conference last month that the company had reduced to two, from six, the number of rigs it is using to drill in a promising Oklahoma field because of the depressed NGL market.
So investors can look to natural-gas liquids to foretell the future of natural gas. Continued low NGL prices will translate into less gas drilling, squeezing supplies, and, ultimately, boosting prices.
.
RYAN DEZEMBER covers mergers, acquisitions, and other topics for The Wall Street Journal.
online.barrons.com/article/SB50001424052748704723404578207760445809162.html?mod=BOL_twm_mw
MORE CRUDE DRILLING LIKELY
The glut of nat gas and its forms saturated the supply demand market to the point where a shift in production from drilling for nat gas to drilling for American oil appears more likely to increase crude supplies from more drilling.
" ... "Now with the weakness in NGLs, there may be further refinement toward crude drilling,"
DECLINING PRICES FOR ENERGY
GLUT and low nat gas prices appear to confuse peak oil advocates in DENIAL that price could fall significantly.
DEMAND TO DECLINE
If I am correct that the most common American will spend a bit less in 2013 than 2012 because of the 2% increase in payroll tax associated with SS, then a declining US GDP will mean energy demand will decline. No hope of an EU increase in GDP and demand for energy appears likely. China's demand and growth rate has slowed as its vendor financed exports to the EU & US can not increase if spending continues to decline.
===============================================================
JANUARY 5, 2013 What Might End the Gas Glut
If prices of associated liquids stay low, energy producers will cut gas output, squeezing supplies.
The natural-gas market is starting this year much as it did the last, oversupplied, with prices lower due to unseasonably mild weather. But there's one important difference: Prices of key natural-gas liquids are much lower now.
In fact, the price of these liquids, such as ethane and propane, can be used as a barometer of the prospects of their cousin, natural gas. Natural-gas liquids, or NGLs, are pulled up at many gas wells and earlier last year had been fetching enough cash to make the wells worth drilling, despite abundant supplies of natural gas, which sent that fuel to 10-year lows in 2012.
Natural gas has fallen on forecasts for warmer-than-normal temperatures in some major heating markets. Producers have been hoping for frigid temperatures that would prompt homeowners to burn through winter stockpiles. On Friday, the U.S. Energy Information Administration said that despite the winter's largest drawdown in the week ended Dec. 28, supplies remain at record highs for this time of year.
Despite flagging prices, production of natural gas continues to surge. On Jan. 7, the agency is scheduled to reveal how much gas was pumped out of the ground in October. September output set a new shale-era record at 73.05 billion cubic feet per day, according to the EIA.
Last week, natural-gas futures for February delivery ended at $3.287 per million British thermal units on the New York Mercantile Exchange, a 15.8% drop since they hit a 2012 high of $3.903 per million BTUs in late November.
HIGH PRICES FOR NGLS had encouraged drilling, swelling natural-gas output. However, that support is disappearing. Only a few months after gas prices hit their 10-year low, producers were flooding the markets with ethane, a building block of plastics, and propane, a fuel often used in heating and cooking.
Since then, NGL prices have nose-dived.
Ethane at the Mont Belvieu, Texas, trading hub, fetched 22.75 cents per gallon Friday, down from nearly 90 cents a year ago, and near an 11-year-low, according to Platts research. The price is so low that some companies can't justify the cost of separating ethane from natural gas, further boosting gas supplies. Propane prices are also in the dumps, trading at 87.2 cents per gallon at Mont Belvieu near the end of the week, 62.2% below the year-earlier level, according to the EIA.
Low NGL prices eventually may end the natural-gas glut. Without satisfactory profits on natural-gas liquids, energy companies will shift their focus from gas to oil. "Now with the weakness in NGLs, there may be further refinement toward crude drilling," says Jeff Dietert, an analyst with Houston investment bank Simmons.
Indeed, some big energy producers, including Occidental Petroleum (ticker: OXY), EOG Resources (EOG), and Marathon Oil (MRO) are rethinking drilling plans. Marathon CEO Clarence Cazelot told investors at a conference last month that the company had reduced to two, from six, the number of rigs it is using to drill in a promising Oklahoma field because of the depressed NGL market.
So investors can look to natural-gas liquids to foretell the future of natural gas. Continued low NGL prices will translate into less gas drilling, squeezing supplies, and, ultimately, boosting prices.
.
RYAN DEZEMBER covers mergers, acquisitions, and other topics for The Wall Street Journal.
online.barrons.com/article/SB50001424052748704723404578207760445809162.html?mod=BOL_twm_mw