• 5 minutes Rage Without Proof: Maduro Accuses U.S. Official Of Plotting Venezuela Invasion
  • 11 minutes IEA Sees Global Oil Supply Tightening More Quickly In 2019
  • 14 minutes Paris Is Burning Over Climate Change Taxes -- Is America Next?
  • 4 hours Let's Just Block the Sun, Shall We?
  • 4 hours Alberta govt to construct another WCS processing refinery
  • 11 hours U.S. Senate Advances Resolution To End Military Support For Saudis In Yemen
  • 11 hours Waste-to-Energy Chugging Along
  • 16 hours What will the future hold for nations dependent on high oil prices.
  • 15 hours Venezuela continues to sink in misery
  • 1 day UK Power and loss of power stations
  • 19 hours Contradictory: Euro Zone Takes Step To Deeper Integration, Key Issues Unresolved
  • 10 hours Regular Gas dropped to $2.21 per gallon today
  • 1 day No, The U.S. Is Not A Net Exporter Of Crude Oil
  • 1 day Zohr Giant Gas Field Increases Production Six-Fold
  • 1 day EPA To Roll Back Carbon Rule On New Coal Plants
  • 5 hours Sleeping Hydrocarbon Giant
  • 7 hours Sane Take on the Russia-Ukraine Case
Alt Text

Natural Gas Prices Fall Below Zero In Texas

Soaring oil production in Texas…

Alt Text

Are Natural Gas Prices Set To Spike?

Natural gas inventories have plunged…

Alt Text

Are Natural Gas Prices About To Break Out?

Natural gas inventories are low…

Nick Cunningham

Nick Cunningham

Nick Cunningham is a freelance writer on oil and gas, renewable energy, climate change, energy policy and geopolitics. He is based in Pittsburgh, PA.

More Info

Trending Discussions

Natural Gas Companies Slammed By Low Prices

Natural gas spot prices continue to hover near multiyear lows, putting increased pressure on natural gas producers as revenues sink.

Although rig counts have been falling for years, a handful of rigs continue to disappear each week. The natural gas rig count is down to just 193 as of mid-November, down by nearly half from this point a year ago. To make matters worse, oil rigs are also vanishing, so the associated natural gas that is produced in conjunction with oil is also starting to tip. Natural gas production nationwide was down 0.2 percent for the week ending on November 18. Taking the past few months into consideration, it appears that total U.S. natural gas production has peaked for now (see graph). Both crude oil and now natural gas prices are too low to sustain such heady levels of growth.

But the sudden halt to production growth has yet to translate into price gains. In fact, natural gas prices have fallen much more quickly in recent months. Related: Poor Quarter for Canada’s Oilfield Services

Henry Hub spot prices dropped below $2.10 per million Btu on November 20, near the lowest levels since 2012. That is sharply down from the levels that Henry Hub traded over the summer, near $3/MMBtu. Mild temperatures in the Northeast has kept a lid on demand, causing prices to fall. And the El Nino expected this winter could lead to mild conditions throughout the Northeast and Midwest, which is also pushing down prices.

But the larger reason that prices are getting crushed is because of the rising levels of natural gas diverted into storage. Just as many analysts are watching crude oil storage levels as a sign of oversupply, natural gas inventories are also building up. For the week ending on November 18, natural gas storage jumped by 15 billion cubic feet, bringing total levels above 4,000 Bcf for the first time ever. Related: Energy Storage Tech Finally Starting To Compete With The Grid

Normally, at this time of year, natural gas storage is drawn down. Inventories go through seasonal changes – supply gets put into storage in the summer, and then burned during cold winter months. However, net storage continues to climb through this month. Storage is now five percent above the five-year average.

Ultimately, just like oil markets, natural gas production will have to continue to decline in order for prices to see a rebound. As production falls, inventories will be used, burning off the excess. But if mild temperatures persist and production does not fall significantly, prices will bear the brunt of that, remaining low through next year. Goldman Sachs predicts that natural gas prices could average $2.85/MMBtu in 2016. That is very low by historical standards, but given the current state of affairs, the investment bank also cautions that the risk could be that the estimate is too high.


Related: Why French Military Action In Syria Doesn’t Affect Oil Prices

In the interim, natural gas producers are getting slammed by low prices. Look no further than Chesapeake Energy Corp., the second largest producer of natural gas in the United States, but also the second largest issuer of junk debt among energy companies. The value of the company’s corporate bonds have crashed since the start of the year, falling to record lows on November 19. Bloomberg notes that Chesapeake’s bonds are losing favor among investors, and they were the second most actively traded notes on the high-yield market last week. The only company to see more trading activity was the Brazilian state-owned oil company Petrobras, the most indebted oil company in the world. Chesapeake’s share price dropped to its lowest level in more than 13 years, and fell by more than 15 percent over the course of last week alone.

“We are seeing investors capitulate to the reality of the situation,” John McClain of Diamond Hill Capital Management told Bloomberg in an interview. “They have a lot of debt, they are burning through cash and their earnings profile is not getting any better. They are trading worse than their credit rating suggests, and there is almost certainly a downgrade coming.” Investors are increasingly concerned that they too might be burned by Chesapeake.

But there is little room for a turnaround. With natural gas prices likely staying low for the foreseeable future, producers will continue to feel the pain.

By Nick Cunningham, Oilprice.com

More Top Reads From Oilprice.com:




Back to homepage

Trending Discussions


Leave a comment

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News