Elliott

Natural Gas Production Declines Are Becoming More Evident

Mmarrkk: you raise a good point. I would meet you halfway, and say that the current gas surplus is due to both overfinancing (i.e., loose money) in '08 and depressed demand in '09.

Natural Gas Production Declines Are Becoming More Evident

Any year-over-year analysis using 2008 as a comparison is misleading. When the financials and the hedge funds ran up the price of energy during the commodity bubble last year, the high prices made it attractive for drillers to produce as much as possible. This lead to massive overproduction, which is stuffing all of the available storage today.

Last week 67 Bcf was put into storage. The five year average, using EIA numbers, is 65 Bcf this time of year. I'm not seeing evidence of lower-than-normal production, only a return to normal levels. I think the real story is that we continue to have normal production in the face of a 500 Bcf surplus.