Blackmon’s Predictions for Oil & Gas Industry in 2021
David Blackmon is an independent energy analyst/consultant based in Mansfield, TX. Blackmon is a Forbes contributor and has a 39-year career in the oil and gas industry, most of it in public policy and managing regulatory and legislative issues for various companies, including Burlington Resources, Shell, El Paso Corporation, FTI Consulting and LINN Energy. Blackmon has been around the block a few times and understands not only the technical aspects of our industry, but the politics as well. He recently peered into his crystal ball and predicted what lies ahead (i.e. challenges) for the O&G industry in 2021, including a “regulatory onslaught” from Joe Biden…
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By now it’s a cliche to say that 2020 has been an exceptional year–and not in a good way. For the first time in our memory of writing MDN, we witnessed widespread curtailments or “shut-ins” of wells in the Marcellus/Utica during 2020. That is, drillers voluntarily turned the values off and flowed less gas in a bid to (a) not sell the gas at prices that don’t return a profit, and (b) drive up the price of gas (see 
Although in recent months a number of major Marcellus/Utica drillers have shut-in (or curtailed) some of their natural gas production, apparently those days are over. According to an analysis by S&P Global Platts, M-U gas production in December has (so far) averaged nearly 33.9 Bcf/d (billion cubic feet per day), making December’s month-to-date average the highest on record. In fact, on Dec. 7, two days ago, regional output in the M-U was estimated at 34 Bcf/d, less than 300 MMcf/d below its all-time, single-day record high. What’s going on?
Earlier this week the NYMEX natural gas futures contract for December rolled off and the January contract became the “front contract” being traded. The latest storage numbers–how much gas has *not* been withdrawn from storage–combined with weather forecasts and computerized trading to hammer prices. Natgas was down 10 cents on Wednesday, and down another 27 cents yesterday, for a combined 37 cent loss over the past two days. Yuck. But it’s not all bad news, at least here in the Marcellus/Utica.
Once again the price of natural gas traded on the Henry Hub in south Louisiana, the NYMEX December futures contract, has tanked. The price fell $0.30 yesterday to close at $2.70/Mcf. There were two primary reasons why: (1) The U.S. Energy Information Administration (EIA) released a storage report last Friday showing storage levels are near record-highs (too much supply), and (2) longer range weather models show temps staying warm (not enough demand).
We’ve been tracking the daily price of the NYMEX December futures contract at the South Louisiana Henry Hub on and off for the past few months. Yesterday it closed down again, at $2.86/Mcf (or MMBtu). However, the “spot price” for gas–actual physical gas bought and sold at various trading points along pipelines–has all but crashed and burned in the Marcellus/Utica. It’s bad. Like, historic record low bad.
Last week we were jazzed when noticed the price of natural gas at the NYMEX Henry Hub had soared, up over $0.30 to $3.30/Mcf (see 
When checking the NYMEX futures price for natural gas, which is based on the spot price at the Henry Hub in southern Louisiana, we had a surprise. Just a few days ago the NYMEX was showing right around $3 per million BTUs (or per Mcf, thousand cubic feet). Yesterday the price closed at $3.30/Mcf. Why the huge jump?
The price of natural gas trading at the Henry Hub terminal in southern Louisiana, the national benchmark price used for NYMEX futures contracts, has been on a rocket ship ride up over the past two days. Two days ago the price added $0.12 in a single day (see 
Yesterday MDN told you of a new threat to LNG shipments from Louisiana with the grounding of a semi-submersible rig, blocking traffic coming from Cheniere Energy’s Sabine Pass LNG export terminal (see 
LNG was the main reason for the huge drop in natural gas prices two days ago (see 
Can a single barge sinking (as it did Tuesday night) in the Calcasieu Ship Channel in Louisiana cause the Henry Hub natural gas price to plunge some $0.22 in a single day? It seems the answer to that question is YES.
We spotted a couple of stories, one in Barron’s the other in the Wall Street Journal, about the pickup in the futures price of natural gas over the past week, and how those recent gains have led to impressive gains in the share price for Marcellus/Utica drillers. Yesterday the NYMEX Henry Hub futures price closed up 4.11% to $2.74/Mcf. The rising tide lifts all boats.
Have you caught yourself thinking lately (as we have), “When in the world is the price of natural gas (and oil) going to go up again?” And, “Why is more drilling not happening?” Perhaps you answer yourself with the obvious answer: It’s the pandemic, stupid. If you have said/thought that, you are correct. But what is there about the pandemic (which seems to be getting better) that is causing this ongoing slowdown and low prices for oil and gas?