Skip Olinger

Plenty of Natural Gas: Exploration and Production Companies Keep Increasing Oversupply

Well done article but I have a question for you and the 2 previous commenters.

As I understand it, NG demand has fallen significantly primarily due to a drop in industrial demand and utility demand. Supply has increased as new unconventional plays have gone into production. So producers, who cannot just shut off wells like a light switch, have started to store gas in hopes of higher prices down the road. Storage is becoming full. Once full wells may be forced to shut down. Pressure in the system will fall so even pipelines won't be making revenue as no gas will be moving. Voila, end of the world. Do I have this correct?

But wait, if you want to sell your gas at say $4.50 rather than $2.73 all you would have to do is sell a futures contract for Dec delivery. That is 3.5 months away! There must be plenty of producers that have sold their production forward for winter delivery and intend of delivering. And, if you want $5 all you have to do is sell for June '10. What am I missing here?? I would appreciate some help.

Also, the economy seems to be turning around a bit. That should start to increase industrial and utility demand. How do you see that playing out??

Lastly, how do you see the Pickens theory play out with conversion to NG use away from Petroleum. I suspect that is a ways off but some government car fleets are now being converted?

Thanks to all for your help