“As we go up through the shoulder season, I would expect even lower prices,” said Kilduff. “I think we would test $1.86 with an eye towards lower, but the industry will react to these new lower prices with cuts in production. Prices will be highly reactive to any emergent cooling demand here because electricity production is going to be overweighted to natural gas.”
In response to record supply, drillers, like Chesapeake , have been shutting down production, and in some parts of the country, drillers have resorted to flaring gas to burn it off.
“I think right now with the way rig count has been falling off in the past few months, we’re going to hinge on the next production report” from the EIA April 30, Armstrong said.
“There’s a couple of factors that really kind of make it inconsequential as to where the price of natural gas is. One is that many of these wells are producing associated oil and the you get natural gas liquids, which are both priced, based on the crude price. The wells are still profitable and certainly in many parts of the country, particularly in west Texas, the dry natural gas is just being flared at the well head,” said Armstrong.Page 2 of 3 | Prev Page | Next Page