Seeking Alpha

Natural gas futures drop below $2 for the first time since Jan. 2002, as weak demand and robust...

Natural gas futures drop below $2 for the first time since Jan. 2002, as weak demand and robust production have sent prices sliding 33% YTD. While the number of working U.S. gas rigs has fallen 27% Y/Y, gas output remains high because most wells produce a mix of oil and gas regardless of classification; high oil prices thus often effectively subsidize the cost of continued gas production.
Comments (7)
  • Ricardo Espinosa
    , contributor
    Comments (458) | Send Message
     
    Almost time to buy.
    11 Apr 2012, 05:12 PM Reply Like
  • Tom Guttenberger
    , contributor
    Comments (717) | Send Message
     
    Steep contango so sub-$2 spot is a little bit of an aberration. Still love that 60-1 brent to ng, pretty funny.
    11 Apr 2012, 06:20 PM Reply Like
  • tunaman4u2
    , contributor
    Comments (2948) | Send Message
     
    Its insane... insane I tell you !
    11 Apr 2012, 08:02 PM Reply Like
  • Poor Texan
    , contributor
    Comments (3530) | Send Message
     
    Need infrastructure!
    11 Apr 2012, 07:14 PM Reply Like
  • Navid Ghanooni
    , contributor
    Comments (27) | Send Message
     
    Is there a defined correlation between natural gas prices and oil prices? This Market Current brings up an important point in regards to the subsidizing effects of high oil prices on natural gas prices.
    11 Apr 2012, 11:08 PM Reply Like
  • Tom Guttenberger
    , contributor
    Comments (717) | Send Message
     
    Historically yes. The long-term ratio I have always heard quoted is 7-1 oil to ng, I feel 10-1 is ballpark estimate of the ratio. The correlation has almost completely broken down in recent years because nat gas is a by product of certain new drilling techniques which have become increasingly popular as we scramble to keep oil supply at a non-panic-inducing level, especially in the U.S. Coupled with a warm winter, we are left with a huge nat gas inventory, and a really supressed spot price. As a self-proclaimed oil perma-bull and peak theory believer, this story line seems consistent to me. But at the end of the day energy is energy, and price paths can only become so disparite until technology and businesses adapt to the supply/demand circumstances.
    12 Apr 2012, 09:10 AM Reply Like
  • Moon Kil Woong
    , contributor
    Comments (11118) | Send Message
     
    There is way too much natural gas production because the US doesn't embrace LNG like it should. And the author is right that it is made when gas is pumped. You get it regardless of whether you need it or not. That's why I don't really see a floor on it. They'd sell it cheaper just to get rid of it.
    12 Apr 2012, 03:28 AM Reply Like
DJIA (DIA) S&P 500 (SPY)
ETF Tools
Find the right ETFs for your portfolio:
Seeking Alpha's new ETF Hub
ETF Investment Guide:
Table of Contents | One Page Summary
Read about different ETF Asset Classes:
ETF Selector

Next headline on your portfolio:

|