toobad41

Out of (Natural) Gas

Today's natural gas glut is more related to what happened a couple of years ago...operators began drilling and producing gas as fast as they could because the NG pricing was very, very good. Then all of a sudden the economy collapsed and demand went with it. Because there are very few places where you can store any significant amount of gas most wells are shut-in (for a better market), production is often constrained by pipeline pressure or capacity, etc. So those companies will not be inclined to spend money in the coming year until demand picks up, prices for natural gas goes back up or inventory is used up. So my take on this is that the cycle will bottom by the second quarter next year (2010) and the cycle will begin its upward journey in the third quarter next year. Drilling budgets are usually determined in the fall (2010) and drilling expenditures begin in January of the following year (2011).