Mmarrkk

Fast Money Recap - 6 Companies That Make Real Things (3/6/09)

Agree with APB up to a point. I disagree that CHK and others have drilled "far beyond any realistic demand requirements". Now, they have drilled beyond demand, but I'd argue that its not really that far. We consume somewhere between 55 and 60 BCF/day in the US. Most estimates of oversupply these days lie in the 2.5 to 4 BCF/day range. Not sure I'd call that "far beyond any realistic demand". It does show that our markets are very volatile and susceptible to big price swings when demand/supply is nudged just a bit. And that saw will cut both ways when the situation flips.

We have dropped 30-40% of the rigs drilling in the U.S. and new wells are plummeting. Also, some companies are shutting in production. This will quickly (late 2009?) bring balance to the situation. Unfortunately, we won't stay balanced for long and will end up with a shortfall again and higher prices again. Then, we'll do the same all over again, with crashing prices and rising prices.

LNG imports are a problem, though. Oversupply of very low incremental cost LNG (think $0.90 to $2.00 per mmBTU) could flood the US market in late 2009 to early 2010 if world markets don't recover. But if world markets don't recover by then, we'll have plenty of other problems to worry about!!