econintersect.com
       
  

FREE NEWSLETTER: Econintersect sends a nightly newsletter highlighting news events of the day, and providing a summary of new articles posted on the website. Econintersect will not sell or pass your email address to others per our privacy policy. You can cancel this subscription at any time by selecting the unsubscribing link in the footer of each email.



posted on 13 April 2016

Natural Gas Almost Ready For Take-Off

by Robert Rapier, Investing Daily

Investing Daily Article of the Week

Since reaching a monthly average of $6 per million British thermal units (MMBtu) in February 2014, natural gas prices have declined almost steadily - recently dropping under $2/MMBtu:

160323TELnatgasprice

Natural gas prices began to decline ahead of the oil price crash that started in the summer of 2014. Some of the reasons for the declines in both commodities are the same (explosive growth in shale production), but natural gas prices are also highly weather sensitive. The spike in early 2014 happened in response to an unusually cold winter that drew down natural gas inventories to historically low levels, but then mild summers and winters followed.

The moderate weather allowed the depleted natural gas inventories to replenish at a rapid pace, and that's kept downward pressure on prices. Natural gas storage levels returned to normal by January 2015, and by September 2015 they were approaching historically high levels - where they remain today:

160323TELnatgasstorage

Natural gas demand growth has been robust, it's just that it has lagged behind supply growth. There are a number of long-term drivers for natural gas that should ensure strong demand growth for several more years. Last week the Energy Information Administration (EIA) highlighted one of the key demand drivers in Today in Energy:

160323TELnatgaspowersources

The graphic illustrates the important role natural gas has played in the decline of the U.S. coal industry. The EIA projects that this year natural gas will supplant coal for the first time ever as the nation's leading power source on an annual basis.

Coal's market share has fallen from around 50% in 2000 to this year's estimated 32%. Over the same time frame, the market share for natural gas has increased from around 15% to this year's estimated 33%. Almost all of coal's losses in the power sector since 2000 can be explained by increased natural gas consumption.

This may come as a surprise to environmentalists that have been quick to highlight the role of renewables in the coal industry's woes. While renewables have indeed made a contribution, it pales in comparison with the damage the shale gas boom has inflicted on the coal industry.

Note that the shift in the power sector is only one driver of increasing natural gas demand. There are huge new investments underway in the chemical manufacturing that will further boost demand. The University of Texas' Center for Energy Economics has estimated that new petrochemical projects will boost industrial demand for natural gas by 19% to 31% by 2020.

There are additional demand drivers such as new liquefied natural gas (LNG) export terminals. The EIA estimated in a 2012 report that 12 billion cubic feet per day of natural gas exports would increase domestic natural gas prices by more than $1.50/MMBtu.

Two years ago, I warned of near-term downside for natural gas if production growth significantly outpaced demand. That is indeed what happened, primarily due to the moderate weather. But note that since 2000 natural gas prices have rarely dropped below $2/MMBtu, and every time that happened prices subsequently rebounded above $5/MMBtu.

I don't expect the current situation with natural gas to be any different, especially considering the coming demand drivers, which in addition to the growing power consumption, LNG exports and petrochemical demand include rapidly rising exports to Mexico. Natural gas production growth has been robust for a decade, but current prices have caused output growth to flatten. The inevitable result will be higher prices, and big gains for North American natural gas producers.

This outlook is reflected in our portfolios for The Energy Strategist. Join us for these recommendations, including our current #1 rated Best Buy which is one of the lowest-cost producers in the most important shale gas play in the country.

I'll be discussing this recommendation and others in May at our annual Wealth Summit conference, held this year in Las Vegas. It's a great way for me to meet subscribers one-on-one, and there are still spaces open if you're interested. Also this year I'll be making a special recommendation to those who attend the summit, and to those who are members of our Wealth Society. (WESO members receive all the Investing Daily newsletters and other premium services.)

For me it's a fun exercise because there are no rules. I'm not bound to recommend energy stocks. Nor am I allowed to reveal the pick in The Energy Strategist. But I'd love to discuss it with you in Las Vegas.

>>>>> Scroll down to view and make comments <<<<<<

Click here for Historical Investing Post Listing










Make a Comment

Econintersect wants your comments, data and opinion on the articles posted.  As the internet is a "war zone" of trolls, hackers and spammers - Econintersect must balance its defences against ease of commenting.  We have joined with Livefyre to manage our comment streams.

To comment, using Livefyre just click the "Sign In" button at the top-left corner of the comment box below. You can create a commenting account using your favorite social network such as Twitter, Facebook, Google+, LinkedIn or Open ID - or open a Livefyre account using your email address.



You can also comment using Facebook directly using he comment block below.





Econintersect Investing


search_box

Print this page or create a PDF file of this page
Print Friendly and PDF


The growing use of ad blocking software is creating a shortfall in covering our fixed expenses. Please consider a donation to Econintersect to allow continuing output of quality and balanced financial and economic news and analysis.


Take a look at what is going on inside of Econintersect.com
Main Home
Analysis Blog
The Theory of the Monetary Circuit: A Critique
The Expected Effects of Petitions to Improve the Monetary System
News Blog
Early Headlines: Asia Stocks Up, Oil Surges, OPEC Cuts Production, Student Loan Woes Mount, Trump Still Close, Aleppo Hospitals Bombed, Huge Wind Storm In Oz And More
The World's Most Sustainable Cities
Big Sam In Bad Company
Other Ways To Spend Your AirPod Budget
Crashing Space Station Shows Why China Must Start To Collaborate In Orbit
NFL Edges Towards A Full House In London
What We Read Today 28 September 2016
October 2016 Economic Forecast: Outlook Insignificantly Declines But Little Economic Strength Entering 4Q2016
1 Minute. 34 Seconds. In The U.S., That's All It Takes To Register To Vote. A Single Registration Lasts A Lifetime Of Elections. We've Made It Easy For You Here: Http://g.co/elections/134
Durable Goods New Orders Unchanged in August 2016
90% Rally In Sugar Prices Since Late 2015
U.S. Real Wage Growth: Slowing Down With Age - Part 2 Of 2
Infographic Of The Day: Four Tips To Grow Wealth
Investing Blog
Will Deutsche Bank Survive
Banks Of Absurdity
Opinion Blog
The Federal Reserve Note
Trump, Trade And Taxes
Precious Metals Blog
War On Cash Turns To $20, $50, And $100 Bills
Live Markets
28Sep2016 Market Close: Wall Street Closes Higher After A Sluggish Start In The Morning, Crude Prices Close Higher In Face Of GS Saying Crude Will Fall, Indicators Neutral
Amazon Books & More






.... and keep up with economic news using our dynamic economic newspapers with the largest international coverage on the internet
Asia / Pacific
Europe
Middle East / Africa
Americas
USA Government



Crowdfunding ....






























 navigate econintersect.com

Blogs

Analysis Blog
News Blog
Investing Blog
Opinion Blog
Precious Metals Blog
Markets Blog
Video of the Day
Weather

Newspapers

Asia / Pacific
Europe
Middle East / Africa
Americas
USA Government
     

RSS Feeds / Social Media

Combined Econintersect Feed
Google+
Facebook
Twitter
Digg

Free Newsletter

Marketplace - Books & More

Economic Forecast

Content Contribution

Contact

About

  Top Economics Site

Investing.com Contributor TalkMarkets Contributor Finance Blogs Free PageRank Checker Active Search Results Google+

This Web Page by Steven Hansen ---- Copyright 2010 - 2016 Econintersect LLC - all rights reserved