HardAssetsInvestor

Written by Sumit Roy  |

April 12, 2012

Natural Gas Report: Price Could Fall To $1 Or Rise To $3 Depending On Production Levels

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The natural gas market is facing an unprecedented glut. We examine the latest outlook.

Natural gas prices were little changed today after the Energy Information Administration reported that storage operators injected 8 bcf into storage last week. That was below market expectations that were calling for an injection close to 18 bcf, but excluding a one-time accounting adjustment of 10 bcf, the figure was in line with estimates.

Earlier this week, natural gas plunged below $2/mmbtu for the first time in 10 years, as the unprecedented glut of inventories in the U.S. and Canada weighed on already-depressed prices.

NATURAL GAS

It is impossible to say when the free fall in prices will end, but until there is meaningful erosion in the supply surplus, the market will continue to fear the possibility of a storage overflow scenario later this year.

At 2,487 bcf, U.S. inventories are a whopping 880 bcf above the year-ago level and 937 bcf above the five-year average.

In Canada, inventories total 493 bcf, which is 297 bcf above the year-ago level and 288 bcf above the five-year average.

Combining the two, North American natural gas inventories are now a whopping 1,177 bcf above the year-ago level and 1,226 bcf above the five-year average (calculated using a slightly different methodology than the EIA).