Record April natural gas prices point to near-to-midterm market strength

Whatever happened to the April doldrums for natural gas prices? This time of year has traditionally been a dead spot in the calendar for natural gas prices, coming off the heating season and ahead of the cooling season. Yet natural gas prices are flirting with $3/MMbtu, reaching a record high for this month.

The question now becomes: How high will natural gas prices go this summer if futures contracts are already trading at $3? As always, demand is a key, but that can usually be predicted with some confidence, within a range of weather patterns and unusual outages of competing energy sources. But even more important these days is the direction of supply. What's really driving the natural gas market these days is lagging wellhead deliverability. So it becomes critical to get a handle on where production levels are going to settle in the US and Canada.

We discussed the current market fundamentals for the natural gas market in this space last week. This week, let's turn to the outlook for the near term and midterm, viewed initially through the prism of supply.

Ziff Energy Group, Houston, recently conducted its second annual gas industry outlook survey, focusing on gas prices, supply, and demand in 2000. The survey covers the entire spectrum of the gas industry, including 124 companies in the US and Canada from producers to pipelines to storage operators, gas marketers, local distribution companies, and end users.

Supply-demand outlook

A little more than half of US producers queried in the survey expect to produce at least 5% more at yearend, while 19% expect production increases of more than 15%.

In Canada, more than 70% of the producers surveyed expect to hike their output by 5% or more, and about 25% project a production boost of at least 15%.

At least half of the survey respondents think that net Canadian exports will increase by as much as 700 MMcfd in 2001, while a third reckons that Canadian exports will increase by 700-900-MMcfd. Looking at the biggest impending increment of new capacity, the Alliance Pipeline, which is expected to start up in fourth quarter 2000, will have a throughput capacity of 1.3 bcfd. Alliance, says Ziff, is likely to carry more volumes of Canadian export gas than is forecast for the growth in Canadian net exports because it will divert some gas from other pipelines exiting Western Canada.

Respondents to Ziff's survey predicted that US gas sales will grow moderately this year and somewhat more in 2001. About 70% of the survey respondents predicted sales growth at 1-3% for both years, favoring the higher end of that range for 2001.

As for Canada, the survey results suggest more modest expectations, at about 1-2%-with 20% forecasting little or no growth. With regard to gas sales directed toward the power generation sector, almost all respondents think that gas sales will increase by at least 2%/year, and 40% expect growth of at least 4%/year in this dynamic sector of the market.

Price outlook

There is a consensus on the outlook for natural gas prices this year, and it settles in at the end of the year nicely almost near $3/MMbtu. About 94% of the Ziff survey respondents expect New York Mercantile Exchange futures prices to close out the year above $2.73, and 40% of those surveyed expect NYMEX prices to end the year at more than $3.13.

According to Ziff, "Few of the respondents to our survey expect gas prices to decline, but most are less concerned than (they were) last year that prices may put gas sales at risk."

That encouraging interpretation is underscored by the survey result that almost all respondents believe that gas sales to the electricity sector would become noncompetitive at a burner tip price of $3.50/MMbtu. That contrasts dramatically with a comparable expectation for that occurrence at a price range of $2.75-3.00/MMbtu. (It also points to the role of expected continuing high oil prices in the outlook for natural gas prices.)

One interesting aspect of the survey is that Canadian respondents expect to see a lower level of net export growth than do US respondents; it may be not be too much of a strength to conclude, then, that US respondents are overestimating near-term supply growth and thus underestimating their price expectations.

In the transportation sector, respondents to Ziff's survey believe that gas supply growth poses the biggest hurdle to registering any increases in natural gas pipeline capacity. By contrast, a year ago, survey respondents considered price differentials to be the biggest hindrance to expanding pipeline capacity.

On the other hand, survey respondents contend that the biggest single potential challenge to increasing gas supply is a return to natural gas prices below $2.25/MMbtu.

At a time of self-fulfilling prophecies in the energy commodities business, that prediction, however, doesn't look like much to sweat over.

OGJ Hotline Market Pulse
Latest Prices as of April 14, 2000

Click here to enlarge image


Click here to enlarge image


Nymex unleaded

Click here to enlarge image


Nymex heating oil

Click here to enlarge image


IPE gas oil

Click here to enlarge image


Nymex natural gas

Click here to enlarge image


Related Articles

PHMSA proposes pipeline accident notification regulations

07/02/2015 The US Pipeline and Hazardous Materials Safety Administration has proposed new federal oil and gas pipeline accident and notification regulations. ...

Quicksilver Canada gets LNG export approval

07/02/2015 Quicksilver Resources Canada Inc. has received approval from the National Energy Board of Canada to export 20 million tonnes/year of LNG from a pos...

Origin lets contract for Otway basin fields

07/02/2015 Origin Energy Ltd., Sydney, has let a $1.3 million (Aus.) contract to Wood Group Kenny for provision of a detailed engineering design for the onsho...

MARKET WATCH: NYMEX oil prices plummet on crude inventory build, Iran deadline extension

07/02/2015 Oil prices plummeted more than $2/bbl July 1 to settle at a 2-month low on the New York market after a weekly government report showed the first ri...

API to issue recommended practice to address pipeline safety

07/01/2015 The American Petroleum Institute expects to issue a new recommended practice in another few weeks that addresses pipeline safety issues, but the tr...

Shell Midstream Partners takes interest in Poseidon oil pipeline

07/01/2015 Shell Midstream Partners LP has completed its acquisition of 36% equity interest in Poseidon Oil Pipeline Co. LLC from Equilon Enterprises LLC, a s...

Shell makes FID on Appomattox deepwater development in Gulf of Mexico

07/01/2015 Royal Dutch Shell PLC has taken a final investment decision (FID) on the Appomattox deepwater development, authorizing construction and installatio...

MARKET WATCH: Oil prices decline as US crude inventories post first gain in 9 weeks

07/01/2015 Oil prices on July 1 surrendered much of their gains from the day before after the release of a government report showing the first rise in US crud...

Woodside-led Browse FLNG venture enters FEED phase

07/01/2015 The Woodside Petroleum Ltd.-led Browse LNG joint venture has entered the front-end engineering and design phase for a floating LNG (FLNG) developme...
White Papers

UAS Integration for Infrastructure: More than Just Flying

Oil and gas companies recognize the benefits that the use of drones or unmanned aerial systems (UAS) c...

Solutions to Financial Distress Resulting from a Weak Oil and Gas Price Environment

The oil and gas industry is in the midst of a prolonged worldwide downturn in commodity prices. While ...
Sponsored by

2015 Global Engineering Information Management Solutions Competitive Strategy Innovation and Leadership Award

The Frost & Sullivan Best Practices Awards recognise companies in a variety of regional and global...
Sponsored by

Three Tips to Improve Safety in the Oil Field

Working oil fields will always be tough work with inherent risks. There’s no getting around that. Ther...
Sponsored by

Pipeline Integrity: Best Practices to Prevent, Detect, and Mitigate Commodity Releases

Commodity releases can have catastrophic consequences, so ensuring pipeline integrity is crucial for p...
Sponsored by

AVEVA’s Digital Asset Approach - Defining a new era of collaboration in capital projects and asset operations

There is constant, intensive change in the capital projects and asset life cycle management. New chall...
Sponsored by

Transforming the Oil and Gas Industry with EPPM

With budgets in the billions, timelines spanning years, and life cycles extending over decades, oil an...
Sponsored by

Asset Decommissioning in Oil & Gas: Transforming Business

Asset intensive organizations like Oil and Gas have their own industry specific challenges when it com...
Sponsored by
Available Webcasts

The Resilient Oilfield in the Internet of Things World

When Tue, Sep 22, 2015

As we hear about the hype surrounding the Internet of Things, the oil and gas industry is questioning what is different than what is already being done. What is new?  Using sensors and connecting devices is nothing new to our mode of business and in many ways the industry exemplifies many principles of an industrial internet of things. How does the Internet of Things impact the oil and gas industry?

Prolific instrumentation and automation digitized the industry and has changed the approach to business models calling for a systems led approach.  Resilient Systems have the ability to adapt to changing circumstances while maintaining their central purpose.  A resilient system, such as Maximo, allows an asset intensive organization to leverage connected devices by merging real-time asset information with other critical asset information and using that information to create a more agile organization.  

Join this webcast, sponsored by IBM, to learn how about Internet of Things capabilities and resilient systems are impacting the landscape of the oil and gas industry.


On Demand

Taking the Headache out of Fuel License and Exemption Certificates: How to Ensure Compliance

Tue, Aug 25, 2015

This webinar, brought to you by Avalara, will detail the challenges of tax document management, as well as recommend solutions for fuel suppliers. You will learn:

-    Why it’s critical to track business partner licenses and exemption documents
-    The four key business challenges of ensuring tax compliance through document management
-    Best practice business processes to minimize exposure to tax errors


Driving Growth and Efficiency with Deep Insights into Operational Data

Wed, Aug 19, 2015

Capitalizing on today’s momentum in Oil & Gas requires operational excellence based on a clear view of what your business data is telling you. Which is why nearly half* of oil and gas companies have deployed SAP HANA or have it on their roadmap.

Join SAP and Red Hat to learn more about using data to drive process improvements and identify new opportunities with the SAP HANA platform running on Red Hat Enterprise Linux. This webinar will also show how your choice of infrastructure impacts the performance of core business applications and your ability to achieve data-driven insights quickly and reliably.

*48% use SAP,


OGJ's Midyear Forecast 2015

Fri, Jul 10, 2015

This webcast is to be presented by OGJ Editor Bob Tippee and Senior Economic Editor Conglin Xu.  They will summarize the Midyear Forecast projections in key categories, note important changes from January’s forecasts, and examine reasons for the adjustments.


Emerson Micro Motion Videos

Careers at TOTAL

Careers at TOTAL - Videos

More than 600 job openings are now online, watch videos and learn more!


Click Here to Watch

Other Oil & Gas Industry Jobs

Search More Job Listings >>
Stay Connected