• 7 hours Iraq Begins To Rebuild Largest Refinery
  • 11 hours Canadian Producers Struggle To Find Transport Oil Cargo
  • 13 hours Venezuela’s PDVSA Makes $539M Interest Payments On Bonds
  • 15 hours China's CNPC Considers Taking Over South Pars Gas Field
  • 16 hours BP To Invest $200 Million In Solar
  • 17 hours Tesla Opens New Showroom In NYC
  • 18 hours Petrobras CEO Hints At New Partner In Oil-Rich Campos Basin
  • 20 hours Venezuela Sells Oil Refinery Stake To Cuba
  • 1 day Tesla Is “Headed For A Brick Wall”
  • 1 day Norwegian Pension Fund Set to Divest From Oil Sands and Coal Ventures
  • 1 day IEA: “2018 Might Not Be Quite So Happy For OPEC Producers”
  • 2 days Goldman Bullish On Oil Markets
  • 2 days OPEC Member Nigeria To Issue Africa’s First Sovereign Green Bond
  • 2 days Nigeria To Spend $1B Of Oil Money Fighting Boko Haram
  • 2 days Syria Aims To Begin Offshore Gas Exploration In 2019
  • 2 days Australian Watchdog Blocks BP Fuel Station Acquisition
  • 2 days Colombia Boosts Oil & Gas Investment
  • 2 days Environmentalists Rev Up Anti-Keystone XL Angst Amongst Landowners
  • 2 days Venezuelan Default Swap Bonds At 19.25 Cents On The Dollar
  • 3 days Aramco On The Hunt For IPO Global Coordinators
  • 3 days ADNOC Distribution Jumps 16% At Market Debut In UAE
  • 3 days India Feels the Pinch As Oil Prices Rise
  • 3 days Aramco Announces $40 Billion Investment Program
  • 3 days Top Insurer Axa To Exit Oil Sands
  • 4 days API Reports Huge Crude Draw
  • 4 days Venezuela “Can’t Even Write A Check For $21.5M Dollars.”
  • 4 days EIA Lowers 2018 Oil Demand Growth Estimates By 40,000 Bpd
  • 4 days Trump Set To Open Atlantic Coast To Oil, Gas Drilling
  • 4 days Norway’s Oil And Gas Investment To Drop For Fourth Consecutive Year
  • 4 days Saudis Plan To Hike Gasoline Prices By 80% In January
  • 4 days Exxon To Start Reporting On Climate Change Effect
  • 4 days US Geological Survey To Reevaluate Bakken Oil Reserves
  • 4 days Brazil Cuts Local Content Requirements to Attract Oil Investors
  • 5 days Forties Pipeline Could Remain Shuttered For Weeks
  • 5 days Desjardins Ends Energy Loan Moratorium
  • 5 days ADNOC Distribution IPO Valuation Could Be Lesson For Aramco
  • 5 days Russia May Turn To Cryptocurrencies For Oil Trade
  • 5 days Iraq-Iran Oil Swap Deal To Run For 1 Year
  • 7 days Venezuelan Crude Exports To U.S. Fall To 15-year Lows
  • 7 days Mexico Blames Brazil For Failing Auction

Breaking News:

Iraq Begins To Rebuild Largest Refinery

Alt Text

'Perfect Storm' Wreaks Havoc On Europe’s Energy Market

The combination of several unexpected…

Alt Text

The Super Basin Behind U.S. NatGas Dominance

Strong output growth from some…

Alt Text

Putin Inaugurates $27 Billion LNG Arctic LNG Plant

Russian President Vladimir Putin is…

Tsvetana Paraskova

Tsvetana Paraskova

Tsvetana is a writer for the U.S.-based Divergente LLC consulting firm with over a decade of experience writing for news outlets such as iNVEZZ and…

More Info

Is A Bull Market For Natural Gas Around The Corner?

LNG

While the number of drilled but uncompleted wells (DUCs) in the U.S. oil patch is growing as producers wait for higher oil prices, the shale gas plays have seen the number of DUCs decline as drillers take advantage of higher natural gas prices this year compared to last year’s lows.

Expectations of additional takeaway capacity coming online—as well as the rebound in natural gas prices—are making drillers more confident that they will be able to sell their production at higher prices. The companies are still cautious after the downturn, but the economics of drilling an oil well and a gas well have diverged since the 2015-2016 price rout. Gas prices have almost doubled since March 2016, and drillers are hoping that a bull market is coming, analysts reckon.

However, higher production could also depress natural gas prices once again.

The Henry Hub natural gas spot price averaged US$2.98 per million British thermal units (MMBtu) in June. This compares to US$1.73/MMBtu in March 2016, which was the lowest monthly average price since December 1998. For 2016, the average natural gas spot price of US$2.49/MMBtu was the lowest annual average price since 1999.

Natural gas front-month futures contract averaged US$2.994/MMBtu in June 2017, as compared to US$1.812/MMBtu in March 2016.

Drillers in the biggest U.S. shale gas play – the Marcellus – are increasing production and finishing wells, expecting that prices will be high.

They are “putting a down payment on a bull market that companies hope is coming,” John Kilduff, a partner at commodities hedge fund Again Capital LLC, told Bloomberg

The number of DUCs in the Marcellus dropped by 20 in June over May, to 643, according to EIA’s latest Drilling Productivity Report. The only other area out of the seven most prolific shale plays that saw the number of DUCs decline last month was another gas play in the northeast, Utica. The number of DUCs in the Marcellus was 831 as of July 2015. 

Related: Daily OPEC Oil Prices Now Public For The First Time Ever

Gas production, on the other hand, is expected to rise across all seven shale plays next month, with Marcellus output increasing the most, by 201 million cubic feet/day in August over July, to 19.752 billion cu ft/day.

Not only the oil patch has lowered breakevens since the oil prices collapsed—gas producers have also become leaner and meaner, according to analysts.

Producers in the Appalachian region currently have their breakevens at below US$3/MMBtu, having improved breakeven economics by 15 percent over the past year, James Williams, an Arkansas-based economist for WTRG Economics, told Bloomberg. 

However, a new boom could bring natural gas prices lower again. In addition, new pipeline capacity in the northeast has faced recent setbacks, potentially pushing additional takeaway capacity further in time.

Energy Transfer Partners’ US$4.2-billion Rover pipeline project currently under construction is planned to connect Marcellus and Utica Shale supplies to markets in the Midwest, Northeast, East Coast, Great Lakes, and Gulf Coast regions of the United States, as well as Canada.

But last week, West Virginia environmental regulators ordered the project to cease and desist some land development activities in West Virginia over violations of state environmental regulations, until it fully complies with all rules.

Additional pipeline capacity would ease takeaway constraints and motivate higher production. But increased production could result in a new rout in U.S. natural gas prices.

By Tsvetana Paraskova for Oilprice.com

More Top Reads From Oilprice.com:




Back to homepage


Leave a comment
  • Dan on July 28 2017 said:
    Rather than continue to sell their product for a loss, they should also produce Ng products. Fertilizer,etc. This is going on 9 years of this stupidity.

Leave a comment




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