Outlook

If the observations of a long time student of the natural gas market are correct, the short-term outlook for natural gas prices shows further room for decline while the longer term picture looks much more bullish primarily because of a lukewarm response from the producing sector.

If the observations of a long time student of the natural gas market are correct, the short-term outlook for natural gas prices shows further room for decline while the longer term picture looks much more bullish primarily because of a lukewarm response from the producing sector.

The rebirth of liquefied natural gas (LNG) as an economic alternative for new deliveries most likely will significantly alter the trading patterns of natural gas within 25 years, ultimately transforming gas into a globally traded commodity, similar to how oil is traded worldwide today, according to a new study by economic consultant DRI-WEFA. This shift in trading patterns, said the authors, will improve the security of supply and maintain gas prices, which will be driven by the U.S. benchmark price.

The rebirth of liquefied natural gas (LNG) as an economic alternative for new deliveries most likely will significantly alter the trading patterns of natural gas within 25 years, ultimately transforming gas into a globally traded commodity, similar to how oil is traded worldwide today, according to a new study by economic consultant DRI-WEFA. This shift in trading patterns, said the authors, will improve the security of supply and maintain gas prices, which will be driven by the U.S. benchmark price.

The rebirth of liquefied natural gas (LNG) as an economic alternative for new deliveries most likely will significantly alter the trading patterns of natural gas within 25 years, ultimately transforming gas into a globally traded commodity, similar to how oil is traded worldwide today, according to a new study by economic consultant DRI-WEFA. This shift in trading patterns, said the authors, will improve the security of supply and maintain gas prices, which will be driven by the U.S. benchmark price.

The Energy Information Administration (EIA) said in its June Short Term Energy Outlook that gas production should be down more than 3% this year and supply concerns, though overblown, have been the root cause of prices remaining above $3/MMBtu (EIA said nothing of the liquidity crisis in the market, which may be pushing prices higher — see related story). It also expects the storage surplus to fill in for any supply declines on the production side.

Natural gas is king, the Energy Information Administration (EIA) declared in its annual International Energy Outlook. Gas use worldwide is projected to grow faster than consumption of any other fuel over the next two decades, EIA said. Over the 1999-2020 forecast period, gas use is projected to nearly double in the reference case, reaching 162 Tcf worldwide in 2020.

Natural gas and oil prices are up, and while saying “we remain very bullish on the longer term outlook for natural gas prices over the next couple of years,” some producers are opting to be safe rather than sorry in the short term, increasing their hedges for 2002 over the last few weeks. Three companies — Energen Resources, Comstock Resources and Magnum Hunter Resources — announced new natural gas and oil hedges last week, taking advantage of price levels they had not expected to see and bringing volumes hedged in 2002 to between 23% and 70% of production.

Prices continued to recede along with severe winter weather Wednesday. The declines also continued to grow more consistent across geographical lines. With the exception of a plunge of more than 40 cents at the Florida citygate (which still left it the market’s most expensive point), virtually all other points fell between about a nickel and 15 cents.