In my last post on natural-gas prices, I looked at whether or not U.S. plans to boost exports of liquefied natural gas could finally drive prices up from the trough created by the abundance of supply flowing from new extraction methods for shale gas. Since then, I have come across a few more reasons for why natural gas prices might experience a rise in prices in 2011.
Some energy consultants say companies have aggressively drilled their U.S. shale properties because of regulations that require them to either start drilling on those properties or lose them. But that won’t continue forever.
There are also growing concerns about the somewhat overlooked environmental impact of shale drilling. If those concerns lead to new rules and regulations, the restrictions could rein in supply.
Along with declining and negative profit margins for gas producers, one would expect a redeployment of rigs to crude oil with its much better price. Indeed, that appears to be happening in the U.S.
Last week, the number of natural-gas rigs operating in the U.S. declined for the fifth straight week to a 10-month low. The bigger shale-gas producers in the U.S. are shifting to oil, declares Jeff Rubin.