Overhang

Another hot summer, combined with a continued move by power generators to switch to natural gas, has reduced the big storage overhang and should send natural gas prices higher, according to Goldman Sachs.

A decision by Range Resources Corp. to sell its Barnett Shale portfolio last year to devote more resources to the Marcellus Shale appears to have paid off handsomely, with unconventional output jumping 42% in 2Q2012 from the year-ago period. Natural gas, which makes up 80% of the producer’s total output, rose 48%.

Despite the high level of natural gas storage overhang at the end of last winter, which resulted from record gas production last year and above-normal winter conditions, constructing new storage facilities in the United States is not supported by market conditions at this time, according to a report issued Thursday by FERC’s Office of Enforcement (OE).

Due to the high level of storage overhang at the end of winter, which was the result of record gas production in 2011 and a warm winter, the construction of new storage facilities in the United States is not recommended, according to a report issued by FERC’s Office of Enforcement (OE) Thursday.

Storage overhang isn’t enough to temper the optimism of EnronOil &amp Gas Chairman Forrest Hoglund when it comes to the outlookfor gas this year and next. With demand expected to grow andproduction expected to fall – 3% according to Hoglund – on softdrilling activity, the coming months are shaping up to be good onesfor producers.

Storage overhang isn’t enough to temper the optimism of EnronOil & Gas Chairman Forrest Hoglund when it comes to the outlookfor gas this year and next. With demand expected to grow andproduction expected to fall – 3% by Hoglund’s count – on softdrilling activity, the coming months are shaping up to be good onesfor producers.