On November 15, Energy Solutions, Inc. published its most recent educational analysis, Natural Gas Price Outlook. President Valerie Wood provided a summary of the contents: “Natural gas prices are at eight-year lows, and plentiful supplies have caused some analysts to predict sub-$5 natural gas prices as far out as 2015. If one is looking solely at supply and demand, that forecast may be relevant. But today, the price of natural gas is about so much more than just supply and demand.
“This is uncharted territory for the U.S. Natural Gas Price Outlook explores the factors impacting natural gas prices today, how those factors may change in the next year, and why the middle of 2011 will mark a shift in market momentum.”
In 2009 and 2010, “natural gas producers continued to drill despite falling natural gas prices. However in 2011, Energy Solutions, Inc. anticipates that will change, and some producers will again become sensitive to price level. This will result in a drilling rig cutback. Of course, the current overhang of supply isn’t going to disappear quickly, but by mid-2011 downward price momentum is expected to slow dramatically. Depending on economic recovery, a slowing of downward price momentum, combined with a few production reports that show no supply growth or even minimal supply losses, could be the market data to shift the market direction for natural gas prices from downward price momentum to upward price momentum. Energy Solutions, Inc. believes this is a feasible outcome by the middle of 2011.
“Once upward momentum begins, if it is supported by consistent economic data, the speculative sector is likely to reduce its extreme net-short position, and in doing so, will become more aggressive buyers. Buying will ultimately fuel the upward price momentum pushing natural gas prices back toward $5-$6 per MMBtu in 2012.”
More information on the report and its conclusions is available from Energy Solutions, Inc. http://www.energysolutionsinc.com