Price of NatGas Craters – Goes Under $2 First Time in Four Years

Last Friday (and again yesterday) the price of natural gas futures–the NYMEX NGc1 futures price (based on gas selling at the Henry Hub)–went below $2 per MMBtu (or Mcf). It was the lowest price we’ve seen in nearly four years. In fact, as this post is being written, the latest price NGc1 (Tuesday morning) is trading at is $1.93. Is there any hope for prices to increase?
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EIA Predicts Avg NatGas Price $2.33 in 2020, 9% Lower than 2019

Yes, 2019 was a tough year here in the Marcellus/Utica shale due to low natural gas prices drillers received for their gas. The U.S. Energy Information Administration says the average spot price for natural gas at the benchmark Henry Hub was $2.57 per million BTUs (MMBtu) in 2019. But the news gets worse. EIA says that in 2020, because of increasing natgas production without a corresponding increase in demand, they predict this year’s average HH price will sink to $2.33/MMBtu. That’s 9% lower this year than last.
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EIA: 2019 Natural Gas Prices Lowest in 3 Years

The researchers at the U.S. Energy Information Administration (EIA) have done a deep dive into natural gas prices from 2019 and found the average spot price at the Henry Hub last year was $2.57 per thousand cubic feet (Mcf), down about 60 cents from 2018’s average price. Ouch. The researchers tease out the factors that influenced prices last year, pushing it higher (in some cases) and lower (in others). It is useful analysis, giving us a window into what may happen this year.
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Remembering NGI Founder Ellen Beswick Steis

Ellen Beswick Steis

The launch of Marcellus Drilling News as a full-time venture for founder/editor Jim Willis would not have been possible without Jim working a part-time gig (in marketing) for Natural Gas Intelligence (NGI). The fantastic folks at NGI, specifically Dexter and Alex Steis (publisher and editor-in-chief, respectively) provided Jim with meaningful, long-term support for six years (from 2012-2017). Jim is eternally grateful they allowed him to continue publishing MDN while working (remotely) for NGI. The head of NGI since its founding has been Dexter and Alex’s mom, Ellen Beswick Steis, a true trailblazer who founded the company in 1983. Ellen passed on Christmas Eve at the age of 79 following an illness.
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Oil and NatGas Prices No Longer Linked – Because of Shale

Once upon a time in BSE (before shale era) if you were to chart the price of oil and the price of natural gas together on the same graph, the path/track was almost identical. When the price of oil went up (or down), so too did the price of gas. With the advent of shale in 2008/2009, tracking between the two has changed. It’s gone. The value of natural gas compared to the value of oil is now *much lower* than it was in BSE.
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91% WV Gas Customers Get Lower Bills This Winter Thx to Marcellus

We often spot stories in the press about the price of natural gas for end-user customers going down. A utility here and a utility there will announce a rate reduction. Most of the time we don’t bring you those kinds of stories because they’re pretty common. However, we spotted a story that’s different. The Public Service Commission in West Virginia says natural gas utility companies that serve 91% of the gas customers in the state have filed requests to LOWER the rates they charge for their gas–thanks to abundant supplies of Marcellus Shale gas being extracted in the state.
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Explaining the U.S. LNG Marketplace – Who Sells It, Who Buys It

While on the surface the liquefied natural gas (LNG) marketplace may seem simple and straightforward, when you dig down you’ll find it is complex. There are different kinds of contracts between those who sell the gas, those who liquefy and ship it, and those who buy it. The LNG marketplace is, with the entrance of the U.S., changing rapidly. Our friends at RBN Energy recently posted an explanation for how it all works.
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Pipeline, LNG Plant Outages Cause M-U Gas Prices to Plummet

The “bad old days” of low low prices for natural gas have returned to the Marcellus/Utica region–at least temporarily. During the past few weeks natural gas prices at Appalachian supply hubs Dominion South and Tennessee Zone 4 Marcellus fell from about $2 per million British thermal units (MMBtu) in mid-September to lows of 76¢/MMBtu and 65¢/MMBtu, respectively, on October 4. Ouch. Why the drop-like-a-rock in price? For a variety of reasons, but there are two main factors…
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IHS Markit Predicts NatGas Price Will Fall Below $2/Mcf in 2020

We recently received a press release from IHS Markit, a major analytics company that tracks data in the oil and gas industry. They have a new report that says (sit down please, we’re talking to you MDN reader)…the average price for natural gas over the course of 2020 at the Henry Hub (the NYMEX traded price) will average less than $2 per thousand cubic feet (Mcf). In other words, get ready, the bottom is about to fall out of the market for the price of gas once again. And it’s going to be far worse than a few years go. The last time the price was lower than $2/Mcf on average was in 1995–nearly 25 years ago!
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CME Group Launching First-Ever Physical LNG Futures Contract

The CME Group, formerly known as the Chicago Mercantile Exchange, is a global derivatives marketplace based in Chicago–originally founded to sell physical commodities like grain and eggs. These days CME Group offers a range of financial trading products across all major asset classes, including those based on interest rates, equity indexes, foreign exchange, energy, agricultural products and metals. CME Group is in the process of launching the world’s first-ever physically-delivered LNG contract. What is that and how does that affect our region?
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EQT Plans to Make Money with $2/Mcf NatGas Price

For years MDN has observed that Cabot Oil & Gas is one of the few Marcellus/Utica drilling companies that can “spin straw into gold”–meaning it makes money on selling natural gas even when the price of that gas is in the basement (see Marcellus Driller Cabot Oil & Gas: Wall Street’s NatGas “Unicorn”). The new management at EQT aim to turn their company in a spinning-straw-into-gold company too. In a recent interview with the Pittsburgh Business Times, EQT CEO Toby Rice said his strategy for making $500 million in “free cash flow” within two years anticipates the price of natgas to be $2 per thousand cubic feet (Mcf).
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Can a Single US LNG Export Facility Affect the Price of NatGas?

No doubt you’ve noticed the price of natural gas has been relatively low over the past few weeks, dropping from around $2.40 per thousand cubic feet (Mcf) a month ago to now flirting with $2/Mcf. The last time gas prices went below $2/Mcf was in 2016. One of the reasons, believe it or not, that the price has fallen dramatically over the past few days is because of a single LNG export facility–Cheniere Energy’s Sabine Pass facility (which exports some M-U gas).
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McKinsey: Marcellus Production Will Grow 6% per Year Thru 2030

click for larger version

Powerhouse consulting firm McKinsey & Co. recently released the “North American gas outlook to 2030” report (summary below) with some interesting findings. Among them: Natural gas production in the Marcellus/Utica will rise an average of 6% per year from now until 2030 (next 11 years). And because of the huge supply of gas coming from M-U and the Permian, the price of natural gas will average $2.75 per thousand cubic feet (Mcf) for the long-term, perhaps even a bit lower than $2.75. That’s certainly unwelcome news–but we have to know what we’re dealing with to know how to meet the challenges ahead.
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