"A recovery in crude oil prices is directly and wholly dependent on OPEC balancing world crude markets by reducing OPEC supply."
"The North American natural gas market is different. Except for a small quantity of LNG imports, and primarily during the summer, more than 90% of consumption is supplied within North America. The economic recession and demand destruction, such as the closing of industrial plants, is causing a decline in consumption. In the absence of a supply response, an economic recovery would be needed to balance the market."
"Fortunately, natural gas supply is very price elastic and production rates decline much faster for new gas wells than for oil wells. Natural gas wells lose 30% or more of their production capacity after the first year and more than 50% after two years. Up to 50% of North American gas production comes from wells drilled during just the past five years. Total industry production capability from existing wells declines by an average of more than 20% per year. In the absence of a sufficient quantity of new wells being drilled, supply goes down."
I think that the price of natural gas has bottomed(or is very near it), because we're currently($4.80) near the break-even levels for most North American unconventional gas plays. The demand may still drop as the weather gets warmer and industrial output winds down.
No comments:
Post a Comment