More on oil & gas from a pro. Part 2 of 2.
Sharp Money Manager - good read 2
by: moongodsuxs 05/19/06 02:52 pm
The much-warmer-than-normal winter left natural gas storage at levels not seen in recent memory. In fact, the worry now, with more than 2 trillion cubic feet of natural gas in storage, is that underground storage will fill by August and newly produced natural gas will have no place to go.
The problem is real.
Natural gas storage levels are 31% above last year's levels and 53% above the five-year storage average. Absent a hot summer and increased demand for natural gas to fuel power generation or another significant hurricane season to limit production, storage will remain an issue, and natural gas prices will likely drift close to the current $6 per mmbtu price.
However, you are beginning to see a modest increase in industrial demand, and lower prices will lead to a decision to run more natural gas generation vs. coal-fired plants. In addition, while I don't expect significant reduction in drilling activity, prices well below $6 could lead to a decision to slow exploration. If that happens, the decline rate suggests a quick response in overall natural gas production and, as a result, higher prices.
In short, summer could bring sloppiness in the natural gas markets, but any significant decline in prices that leads to a response in drilling activity would quickly show up in production data, leading to higher prices and more activity.
Simply, any natural gas price correction is likely to be short-lived.
The energy cycle remains intact, but understand that markets never travel in straight lines. Stick to your discipline, know your risk tolerance and do your homework. As always, patience and strategy are rewarded in difficult markets.
This time should be no different.
This was copied from Yahoo message board WGR. Pete
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by: moongodsuxs 05/19/06 02:52 pm
The much-warmer-than-normal winter left natural gas storage at levels not seen in recent memory. In fact, the worry now, with more than 2 trillion cubic feet of natural gas in storage, is that underground storage will fill by August and newly produced natural gas will have no place to go.
The problem is real.
Natural gas storage levels are 31% above last year's levels and 53% above the five-year storage average. Absent a hot summer and increased demand for natural gas to fuel power generation or another significant hurricane season to limit production, storage will remain an issue, and natural gas prices will likely drift close to the current $6 per mmbtu price.
However, you are beginning to see a modest increase in industrial demand, and lower prices will lead to a decision to run more natural gas generation vs. coal-fired plants. In addition, while I don't expect significant reduction in drilling activity, prices well below $6 could lead to a decision to slow exploration. If that happens, the decline rate suggests a quick response in overall natural gas production and, as a result, higher prices.
In short, summer could bring sloppiness in the natural gas markets, but any significant decline in prices that leads to a response in drilling activity would quickly show up in production data, leading to higher prices and more activity.
Simply, any natural gas price correction is likely to be short-lived.
The energy cycle remains intact, but understand that markets never travel in straight lines. Stick to your discipline, know your risk tolerance and do your homework. As always, patience and strategy are rewarded in difficult markets.
This time should be no different.
This was copied from Yahoo message board WGR. Pete
--------------------------------------------------------------------------------
Posted as a reply to: Msg 4037 by moongodsuxs
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posted by Pete at 6:05 AM
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