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$8 Natural Gas; We're Right On Schedule

Forbes -- New natural gas rig counts hit the wires Friday morning and on cue the number decreased yet another 15 rigs to 422, another 21st century low and a massive 55% below the 936 peak one year ago. An article was published by me on July 22nd predicting a spike to $8.00 natural gas by this winter. Well, we are right on track. During that July week natural gas storage numbers were 19.2% and 17.5% respectively above the one and five year averages. Back then we had had eleven straight weeks of below normal storage injections. Since that time we have had a look at thirteen more data points twelve of which were below normal so now the “glut” has diminished to only 6.8% and 7.8% more than the one and five year averages. Thursday’s actual storage injection was 72 Bcf against a 108 Bcf increase one year

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Submitted Oct 15, 2012 By: skb69sa

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remay Champion Author Houston Posts:6,963 Points:2,116,640 Joined:May 2006	Message Posted: Oct 16, 2012 2:37:00 AM Ignore remay Report Abuse Yep, makes sense, drilling drops, prices go up...
drpepperTX Champion Author Texas Posts:8,939 Points:751,985 Joined:Apr 2011	Message Posted: Oct 15, 2012 7:15:26 AM Ignore drpepperTX Report Abuse nsdp, my question was "How do the these proponents of ditching coal feel about the cost of electricity from gas fired plants when NG is $8 per MCF?" Now we have nat gas prices (currently at or near $3.50 per MCF) surging to increase 133% from the low of $1.50 per MCF. As producers WILL continue to hedge their production several years forward, they will be locking in the Henry Hub prices likely well north of $4.00 per MCF, big export increases that likely will begin in 2015 have the probable impact of driving prices somewhat further depending on the storage capabilities in the US. While I agree that a spike to $8 this winter are not likely, a spike to $8 is in no way out of the question within a couple of years, and that goes back to my original question posed.
nsdp Champion Author San Antonio Posts:1,117 Points:47,290 Joined:Jun 2012	Message Posted: Oct 15, 2012 6:32:56 AM Ignore nsdp Report Abuse DRPepperTx I would have expected a more knowledgeable response form someone in Texas of all places. Casing head gas from the development of the Bakken and Eagle Ford added 1,350 BCF of NG to production levels in 2012. That is in increase of 6% over the total NG produced nationwide in 2011. It will drop to 300BCF(1 1/4% of total demand) next year as Anadarko, KinderMorgan and others bring on NGL plants to strip ethane, propane, butane and natural gasoline out of the natural gas stream for chemical plants and new jobs here in the US. The focus on NG drilling is irrelevant in the US right now because of the large amount of drilling in the oil areas. Oil produces NG with it. 10% typically in the Eagle Ford and Bakken to as much as 30% in the Marcellus and Utica Shales. Since they are in Ohio, Pennsylvania, New York and West Virginia they use 80% less compressor fuel to get NG to market. That is like adding 12% to the NG supply from those fields. You might check EOG chairman Mark Pappa's comments on the continuing gas glut and how certain oil fields will exacerbate the problem. I imagine he has a lot more smarts about where prices are going that this desk jockey at Forbes who has a political addenda. If we are going to hit $8 NG soon why are Cheniere and others trying to build LNG export terminals just in time to see US prices spike? That would really be stupid. The author is really stupid to focus on gas rigs only and ignore the net change in oil and workover rigs give the fact that about 25% of the NG in the US comes from OIL Wells. It is like trying to take a picture of the world through a door peephole. [Edited by: nsdp at 10/15/2012 12:41:56 PM EST]
drpepperTX Champion Author Texas Posts:8,939 Points:751,985 Joined:Apr 2011	Message Posted: Oct 15, 2012 6:06:15 AM Ignore drpepperTX Report Abuse And as the war on coal continues... How do the these proponents of ditching coal feel about the cost of electricity from gas fired plants when NG is $8 per MCF?
orphancarguyPE Champion Author PEI Posts:3,843 Points:734,015 Joined:Jan 2011	Message Posted: Oct 15, 2012 3:26:32 AM Ignore orphancarguyPE Report Abuse Forbes, and many others are seeing it in the right light, and it has very little to do with speculators, and everything to do with economics. Natural gas whipsaws wildly in price more than oil ever has, because it is very hard to store when there is an oversupply, and it is impossible (at the pipeline network level) to accept an under-supply that would lower the pressure below a safe level. People with natural gas heating can likely remember prices within the last 15 years of spiking to $16-18 a M BTU, instead of today's all time low of somewhere in the range of $2.50 The recent history has been a US only oversupply that is not permanent, but only temporary. All time low prices have convinced people that CNG cars are the new sliced bread, especially if the GGE (gasoline gallon equivalent) is '$2.50 gallon' or as low as under one dollar a gallon if you are filling from home. Trouble is, that $1.90 to $2.80 per Million BTUs current delivered at home cost--that makes those prices noted above for fuel for vehicles so darn attractive right now when quoted in GGEs--- is going to fly away pretty soon. Also, that super attractive fill from your home supply price is dependent on you buying and having installed for $1500 to $5000 or so, a home filling station. And, these home filling stations are NOT fast--almost as slow as electric ie think overnight rather than under half an hour. Gas companies know what conventional natural gas costs, and that is about $2.00 a M BTUs. For fracked gas, they knew it would be higher, but settled on a guesstimate of $4.00 per M BTUs. The real cost would require that fracked gas well would go through their ENTIRE life cycle--drilling and maintenance overhead costs, connection/delivery, cleaning up and sales over time which is calculated on total recovery at the price you can sell that total production, plus decommissioning of exhausted wells. Fracked gas was too new to have gone through the entire per well cycle--until very recently. Based on some very early wells in Texas, the true cost to break even is not $2 like conventional, or even $4 like the guesstimate, but more in the range of $6.50-$7.50 and this is for some of the BEST and most productive fields/areas for fracking. So, unfortunately, $8 as a possible target average price for all fields of varying qualities and quantities everywhere is looking more and more likely. So, willing to pay more for that Honda or Dodge Ram running on CNG if the refill cost at a commercial station is $1.50-$3.00? Sure you are, especially if you can sometimes refill at home overnight for 75 cents- $1.50 (just for the natural gas itself--the electricity for the compressor pumps is extra) Now, what happens if the price firms up to say only $7.50 from say an average of about $2.50 per M BTUs? That means its three times the current cost, so $2.25 to $4.50 for an overnight home fill and $4.50-$9.00 at a service station (maybe a LOT less if lots of competition develops with lots of volume, so lets pretend in a perfect world its $2.75-$5.00 a GGE at a service station.) Creating and storing and delivering a highly compressed gas requires a huge amount of electricity compared to a liquid fuel like gasoline or diesel where a simple pump, so its going to have to have a higher margin than gasoline and diesel. Are you willing to pay for a more expensive vehicle, even with offsetting government credits, that will make you dependent on a fuel that peaks and crashes much more so, and much quicker than gasoline or diesel ever have?? Would you still like that pickup if instead of costing you $1 GGE with a home fill now, will cost in the $6.00-$10.00 a GGE in a years or so, at a service station? Willing to live with a vehicle with a very limited range (at an 'affordable' price)? Sounds like the CNG vehicle of tomorrow could very easily turn as sour as the worst of electric vehicles today. [Edited by: orphancarguyPE at 10/15/2012 9:27:35 AM EST]
Dr Gas Champion Author Twin Cities Posts:3,265 Points:358,080 Joined:May 2004	Message Posted: Oct 15, 2012 3:02:56 AM Ignore Dr Gas Report Abuse Yep here it is again. There was low prices, but as the weather gets colder yet again it's prodicted that the price will go and go up high for the heating season. IT HAPPENS EVERY YEAR! It 's not news anymore! Screw you natural gas producers!
ss70 Champion Author Detroit Posts:9,653 Points:1,869,125 Joined:Sep 2005	Message Posted: Oct 15, 2012 2:46:48 AM Ignore ss70 Report Abuse These financial papers from wall st want prices to go up all time for the profits but they want Cheap illegal and legal labor with out any restrictions.
scu227 Champion Author New Haven Posts:4,147 Points:770,905 Joined:Feb 2011	Message Posted: Oct 15, 2012 2:09:36 AM Ignore scu227 Report Abuse Keep the speculators out of it !!!!!!!!!!!!!
amerk73 Champion Author Dallas Posts:7,045 Points:1,620,105 Joined:Oct 2008	Message Posted: Oct 15, 2012 1:59:58 AM Ignore amerk73 Report Abuse what next
investmentdr Champion Author Cleveland Posts:4,024 Points:1,454,075 Joined:Sep 2008	Message Posted: Oct 15, 2012 1:46:12 AM Ignore investmentdr Report Abuse nat gas prices have been even higher than $8
bar1035 Champion Author Charlotte Posts:9,150 Points:1,297,245 Joined:Aug 2006	Message Posted: Oct 15, 2012 1:39:08 AM Ignore bar1035 Report Abuse From the contributer network... a no no from the news aspect that gas buddy insists on. Wonder if PD will notice?
58salty Champion Author Jacksonville Posts:6,605 Points:628,915 Joined:Aug 2011	Message Posted: Oct 15, 2012 1:33:07 AM Ignore 58salty Report Abuse $8 only going to go higher
BBopp Champion Author Dayton Posts:6,829 Points:1,936,505 Joined:Dec 2006	Message Posted: Oct 15, 2012 1:20:30 AM Ignore BBopp Report Abuse This is insane! No one will be able to cook, heat their home or water.
GasPriceHelp4u Champion Author Dayton Posts:2,682 Points:567,825 Joined:Jul 2008	Message Posted: Oct 15, 2012 12:23:03 AM Ignore GasPriceHelp4u Report Abuse Great news for consumers for the winter months!!!
greshams Champion Author Cincinnati Posts:2,004 Points:374,650 Joined:Nov 2011	Message Posted: Oct 15, 2012 12:06:37 AM Ignore greshams Report Abuse boy these people are beating us to death with these prices something has to be done, and no president will do anything about it.
subnuke Champion Author Atlanta Posts:7,498 Points:1,507,415 Joined:Sep 2008	Message Posted: Oct 14, 2012 11:51:04 PM Ignore subnuke Report Abuse more doom and gloom - don't think so.
BigDogOH Champion Author Cincinnati Posts:8,498 Points:1,806,845 Joined:Mar 2008	Message Posted: Oct 14, 2012 11:44:56 PM Ignore BigDogOH Report Abuse obamanomics, obummer dose not wan US to have cheep energy of any kind
LostToo Champion Author Illinois Posts:4,392 Points:975,315 Joined:May 2009	Message Posted: Oct 14, 2012 11:44:34 PM Ignore LostToo Report Abuse Numbers????
Z06KY Champion Author Louisville Posts:5,140 Points:904,740 Joined:Nov 2010	Message Posted: Oct 14, 2012 11:44:30 PM Ignore Z06KY Report Abuse Gas will go up more also.
BIGOILEATURCRUD Champion Author North Carolina Posts:5,761 Points:1,377,525 Joined:Nov 2008	Message Posted: Oct 14, 2012 11:43:32 PM Ignore BIGOILEATURCRUD Report Abuse soon
zippy452 Champion Author Cincinnati Posts:9,418 Points:1,806,100 Joined:Oct 2006	Message Posted: Oct 14, 2012 11:43:16 PM Ignore zippy452 Report Abuse Current cash price is $3.35
neptune2008 Champion Author Michigan Posts:8,568 Points:1,668,750 Joined:Aug 2008	Message Posted: Oct 14, 2012 11:42:51 PM Ignore neptune2008 Report Abuse surprise!
momster1 Veteran Author Wisconsin Posts:448 Points:288,665 Joined:Mar 2011	Message Posted: Oct 14, 2012 11:39:00 PM Ignore momster1 Report Abuse Ok
gabisgram Champion Author Michigan Posts:2,191 Points:911,275 Joined:Sep 2006	Message Posted: Oct 14, 2012 11:38:12 PM Ignore gabisgram Report Abuse Dollar is getting more and more worthless, so prices have to go up.
pbear316 Champion Author Akron Posts:2,025 Points:676,165 Joined:Apr 2011	Message Posted: Oct 14, 2012 11:37:42 PM Ignore pbear316 Report Abuse Ok
Petrock Champion Author Lexington Posts:9,118 Points:2,556,785 Joined:Apr 2005	Message Posted: Oct 14, 2012 11:37:36 PM Ignore Petrock Report Abuse QUICK !! Start committing your life to natural gas so they can screw you again and you can whine and wish you could put $6.00 a gallon gasoline in your car!
Dailyrun Champion Author Kentucky Posts:1,977 Points:387,865 Joined:Apr 2012	Message Posted: Oct 14, 2012 11:37:06 PM Ignore Dailyrun Report Abuse Demand drives prices.
4bobux Champion Author Peoria Posts:1,962 Points:409,230 Joined:Mar 2012	Message Posted: Oct 14, 2012 11:35:49 PM Ignore 4bobux Report Abuse ok
Boo1989 Champion Author Atlanta Posts:7,170 Points:1,348,655 Joined:Oct 2008	Message Posted: Oct 14, 2012 11:35:00 PM Ignore Boo1989 Report Abuse "Somehow we have to figure out how to boost the price of gasoline to the levels in Europe." steven chu, obama's energy secretary.
Foxt Champion Author Minnesota Posts:5,255 Points:2,019,355 Joined:Jul 2006	Message Posted: Oct 14, 2012 11:28:52 PM Ignore Foxt Report Abuse Eiter way the cost of fuel is going up. Why go further in debt on a whim.
evohnave Champion Author Virginia Posts:1,745 Points:1,000,000 Joined:Sep 2008	Message Posted: Oct 14, 2012 11:28:40 PM Ignore evohnave Report Abuse 46,820
hawkman1950 Champion Author Michigan Posts:2,615 Points:538,605 Joined:Aug 2010	Message Posted: Oct 14, 2012 11:26:49 PM Ignore hawkman1950 Report Abuse Time will tell.
chevellefan Champion Author Georgia Posts:2,723 Points:591,595 Joined:Sep 2011	Message Posted: Oct 14, 2012 11:23:48 PM Ignore chevellefan Report Abuse we will see
djgunrunner Champion Author Salt Lake City Posts:10,094 Points:2,347,630 Joined:Apr 2005	Message Posted: Oct 14, 2012 11:23:41 PM Ignore djgunrunner Report Abuse If we start using Natural Gas in vehicles their sale would be much higher. It would behoove them to get more wells on line. Without the support of the government at this time Natural Gas is slow in coming on. I live in Utah and in the Salt Lake area we are seeing more and more Natural Gas stickers on license plates. We have the infrastructure and the use is increasing. If the after market conversion sales would quit robbing people for a conversion I would have one on the car I have now but at the time I cannot afford it as I am not going to have this car for another year.
WES03 Champion Author Maryland Posts:4,838 Points:1,264,395 Joined:Feb 2009	Message Posted: Oct 14, 2012 11:23:08 PM Ignore WES03 Report Abuse If you think this is true, invest now.
D4444J Champion Author Albuquerque Posts:1,834 Points:587,905 Joined:Aug 2011	Message Posted: Oct 14, 2012 11:23:00 PM Ignore D4444J Report Abuse Sounds like a good move
Brucevanf Champion Author New Brunswick Posts:1,351 Points:243,310 Joined:Aug 2012	Message Posted: Oct 14, 2012 11:21:36 PM Ignore Brucevanf Report Abuse It is all controlled by the same people.
SUPERSTEVIEO Champion Author Quebec Posts:3,523 Points:787,115 Joined:Oct 2010	Message Posted: Oct 14, 2012 11:19:57 PM Ignore SUPERSTEVIEO Report Abuse good... now to get cars converted.
Bonanza Champion Author Boston Posts:12,081 Points:2,550,030 Joined:Jun 2004	Message Posted: Oct 14, 2012 11:19:49 PM Ignore Bonanza Report Abuse This is the fuel of the future
Tru2psu2 Champion Author Winston-Salem Posts:14,471 Points:1,554,655 Joined:Feb 2004	Message Posted: Oct 14, 2012 11:19:33 PM Ignore Tru2psu2 Report Abuse ouch!
Ziggy1962 Champion Author New Jersey Posts:5,741 Points:1,809,710 Joined:Aug 2006	Message Posted: Oct 14, 2012 11:16:37 PM Ignore Ziggy1962 Report Abuse Interesting.
OTISFL Champion Author Pensacola Posts:4,605 Points:864,840 Joined:Apr 2009	Message Posted: Oct 14, 2012 11:16:01 PM Ignore OTISFL Report Abuse As expected.
gassy4u Champion Author Mobile Posts:3,763 Points:1,326,210 Joined:Sep 2005	Message Posted: Oct 14, 2012 11:15:57 PM Ignore gassy4u Report Abuse And gas goes up.
barber7796 Veteran Author Oklahoma Posts:426 Points:275,460 Joined:May 2012	Message Posted: Oct 14, 2012 11:13:45 PM Ignore barber7796 Report Abuse Just like gasoline; peak season prices go up
kirzon484 Champion Author Atlanta Posts:1,861 Points:432,310 Joined:Jun 2011	Message Posted: Oct 14, 2012 11:09:23 PM Ignore kirzon484 Report Abuse k
wulf2000 Champion Author Miami Posts:3,022 Points:1,388,105 Joined:May 2005	Message Posted: Oct 14, 2012 11:09:13 PM Ignore wulf2000 Report Abuse Interesting article.
joko0 Champion Author New Jersey Posts:1,965 Points:564,640 Joined:Oct 2008	Message Posted: Oct 14, 2012 11:08:44 PM Ignore joko0 Report Abuse It figures.
AvantiMick Champion Author Indiana Posts:12,737 Points:2,541,570 Joined:Dec 2005	Message Posted: Oct 14, 2012 11:07:19 PM Ignore AvantiMick Report Abuse So, Chrysler idea maybe not so good!
twobroke61 Champion Author Michigan Posts:8,375 Points:1,587,985 Joined:Sep 2008	Message Posted: Oct 14, 2012 11:04:59 PM Ignore twobroke61 Report Abuse tomok said it right
bobzilla11 Champion Author Indiana Posts:1,196 Points:494,400 Joined:May 2011	Message Posted: Oct 14, 2012 11:02:53 PM Ignore bobzilla11 Report Abuse profit margins rule