№ 7 (July - August 2010)
Grim Price Outlook Unwelcome News For Natural Gas Industry
A U.S. natural gas rig count that refuses to die and roaring supply inventories paint a bleak picture for prices into 2012, according to a Calgary-based investment brokerage.
FirstEnergy Capital Corp. slashed its 2011 natural gas price forecast by a dollar Monday, telling investors to jump the North American ship in favour of opportunities overseas.
By Dina O.Meary, Calgary Herald
Too much supply and not enough demand have made the resource -- once the bread and butter of Alberta government coffers -- a sinking ship, according to analyst Martin King.
"With this interim price forecast update we are effectively abandoning hope that any price recovery on the scale that we had been previously forecasting for late 2010 and 2011 will come to pass," King said in an early morning report.
The Calgary-based analyst slashed his 2011 natural gas price forecast by a dollar to average $4.75 US per million British thermal units.
King also lowered his 2010 average price to $4.63 US per mmBTU, from $5 US on a surplus of supply for the next couple of years.
He likened the current surplus of natural gas supply and high inventories in storage to a dragon that needs to be killed before prices recover.
North American markets have been flooded with shale gas volumes as producers step up drilling activity south of the border. Analysts attribute the fevered pace of activity to drill-to-keep lease requirements, as well as volumes being supported by dwindling hedging contracts inked at higher prices.