United States Natural Gas Fund LP (UNG)

[benfrankledger]

Natural gas has moved higher in each consecutive trading session following the gap move to the upside. In fact, as of Thursday, November 9, the price action in the natural gas market has been highly bullish as it had rallied for six straight sessions and on the final day of the week, it held its gains.

[benfrankledger]

Last week, the price of natural gas did something it has not done since June it gapped higher from the closing price on Friday to the opening on Monday. On Friday, November 3 the price of the energy commodity traded to a high of $2.9980 on the NYMEX December futures contract and on Monday, November 6, the low of the session was at $3.0510.

[BlueAlien]

UNG adding at 6.66

[BlueAlien]

UNG buyer here @ $7.34

[eFinanceMarkets]

Total U.S. rig count jumps by 12 for eighth straight weekly gain
The total U.S. rig count climbed by 12 to 768, rising for the eighth consecutive week, Baker Hughes reports in its latest weekly survey.
The oil rig count rose by 8 to 617, while the natural gas rig count rose by 5 to 151; a rig classified last week as miscellaneous was removed.

[msmithgold]

Natural Gas Is Mispriced

Summary of RBN Energy 2017 Prognostications

Natural gas, particularly wet natural gas, will be a more attractive market than crude oil

No big recovery in crude, gas forward curve too low, and NGL prices increasing more than both oil and gas

Ethane production will be ramping up as rejection flips to recovery
Between late 2017 and end of 2018, almost all ethane rejection in PADD 3 and 4 will be recovered; only ethane rejection will be due to pipeline constraints out of Marcellus/Utica and Bakken

The frac spread is coming back along with margins for gas processing
Heading back to $5-6/MMBtu level after languishing at $2.30 from Jan. 2015 through end of 2016; good news for processors and producers

Big natural gas price differentials are coming to West and South Texas
Won’t be long before Waha could experience takeaway constraints and situation similar at Agua Dulce

The new administration may Trump down oil and gas prices
US succeeded in overproducing under carbon-unfriendly Obama administration – what might they do if the shackles come off?

The natural gas forward curve is mispriced
As of last day of 2016, 2017 strip was $3.62, 2018 was $0.48 lower and 2019 was $0.27 lower at $2.87; strip in 2022 is only $2.93 – it just can’t be

Capital will drive economics
Historically, plays with best economics attracted capital; now, producers with access to capital are building out significant contiguous acreage positions in their core areas

Rig productivity will continue to improve
From 2011 to 2016, rig productivity was up 260% in Bakken, 465% in Permian, and 840% in Niobrara; this trend is going to be with us for the foreseeable future

US crude production in 2017 will increase, but not at the 1 MMb/d a year growth rate seen from 2012-2014
Decline curves are flatter in the marginal basins and production declines from older wells are slowing; it makes it easier for new wells in the Permian to contribute to production growth

We’ll see no crude price breakout in 2017, one way or the other
OPEC and NOPEC will muddle along and US E&P’s will contribute to the muddle by increasing crude production over time to offset a portion of any real OPEC/NOPEC cuts

Summary of RBN Prognostications: https://investoralmanac.com/2017/01/05/energy-prognostications-for-2017/

[BorisB]

UNG looks bearish for now.. Let's see what it looks like @ $7 . Easily could go lower though..
At some point will be a good play to buy some call leaps imo.

I see no reason to hurry though...

[GimmeWater]

And then that happened.
Don't be fooled though, it may be coming:
https://www.aer.com/science-research/climate-weather/arctic-oscillation
Weak PV means $$$ by seasons end!

[GimmeWater]

Good day all-
I'm new to this one, just picked up some calls because I believe natural gas will begin trending higher. Seems like this winter will bring colder temps than seen in the previous two. Also, the incoming administration has made some promises to the folks in the coal industry that need to be kept. The best way to make coal competitive is find a way to increase the price of natural gas. This is an oversimplification of course, but in general, this seems a logical course in the coming months.
That said, I'm concerned that this fund hasn't followed the price of the underlying commodity as closely as I would expect. Any thoughts as to why?
GLTA

[stocky101]

Fox business analyst expecting huge drawdown in Natgas and a spike in Natgas due to cold snap, production cuts and exports..... Buy Buy Buy

[stocky101]

Should really fly now, cold-weather setting in the Denver area tonight and spreading east

[dwms07]

Did the market answer your question in the last few days? Would you call what happened in the last 4 days a sudden upswing?

I would!

And I would imagine it is gonna go up much more from here!

[PhoenixwingzZ]

the stock has been sinking and sinking though...can anyone really expect it to suddenly upswing?

[dwms07]

DO NOT WATCH THIS SCARY VIDEO!

I been following a bunch of video opinions trying to find if anyone knows what they are talking about. The guy in the video below seems to know more than the rest.

Enjoy......

[Crusen]

Lol. Prof. Ian is a religious preacher of climate misinformation.

http://www.skepticalscience.com/skeptic_Ian_Plimer.htm

[dwms07]

New England area projected cold and snowy!

New England consumes the most liquid natural gas (LNGs) out of anywhere in North America primarily due to high population density and colder climate.

Historically, the price of LNG rises in correlation to snow storms. Because of bottlenecks in the pipelines for LNG, supply is limited in the North East and a demand surge can cause a spike in price.

In 2015, there were only 6 million homes that use traditional heating oil in New England, whereas nearly half of households in the United States use natural gas. Towns that don’t run gas pipelines could also have propane delivered. The pipeline bottleneck is unfortunate for New Englanders who use natural gas especially during a time when prices are exceedingly low. Demand for LNGs is at an all time high and low crude oil prices is suppressing the value further to a spot price around $2.70 per mmbtu. Natural gas reliance is only increasing with the continued effort by the United States to shut down coal plants. For natural gas users, locking in at a low price is highly sensible, or simply buying more blankets.

Consolidated Edison, Inc. is a public company that invests significantly in natural gas transmission projects. They believe natural gas prices could rise to as much as $20-25 mmbtu this winter in the North East. Investors should be on the watch to see how the company reacts over the season and how their projects pan out.

[dwms07]

EIA projects higher natural gas prices and production in 2017

U.S. natural gas prices are expected to rise in 2017 on growing domestic consumption, increased pipeline exports to Mexico, and more exports of liquefied natural gas, the U.S. Energy Information Administration said in its Short-Term Energy Outlook Tuesday.

The agency, part of the federal Department of Energy, predicted the spot price of natural gas will rise to an average of $3.12 per million BTUs next year, up from an average of $2.50 in 2016

link

[dwms07]

sudden natgas drop is market manipulation 11/08/16

I do not see a single reason anywhere for natgas to drop like a stone. The drop started way too early in pre-trade. Short selling had to start in the UK. I see Barclay's Bank and friends trying to scare natgas players into selling out so they can get some dirt cheap share.

Just hold tight... I think the price will move back up nicely!

Just my opinion!

[dwms07]

winter weather forecast


midwest:

Entire US:

Entire US:

Northeast:

Indiana:

Dr Easterbrook Global Warming HOAX:

[dwms07]

Global Warming is Bullshit!

Watch this!

[dwms07]

Global warming is a SCAM w/ Prof Ian

[dwms07]

How Siberia causes bitter cold winters in the US!


https://weather.com/news/weather/news/snow-siberia-russia-united-states-cold

[dwms07]

NG Data for 11/03/16

in storage= 3,863 bcf
up 48 bcf from 2016
up 173 bcf above 5-year average
up 48 bcf above 5-year maximum
up 431 bcf above 5-year minimum

[dwms07]

EIA NG REPORT 11/03/16

Investing.com - U.S. natural gas futures pushed higher on Thursday morning, after data showed that natural gas supplies in storage in the U.S. rose slightly less than forecast last week.

Natural gas for delivery in December on the New York Mercantile Exchange inched up 1.5 cents, or 0.54%, to $2.807 per million British thermal units by 10:41AM ET (14:41 GMT). Futures were at around $2.788 prior to the release of the supply data.

The U.S. Energy Information Administration said in its weekly report that natural gas storage in the U.S. rose by 54 billion cubic feet in the week ended October 28, just below market expectations for an increase of 56 billion cubic feet.

That compared with a gain of 73 billion cubic feet in the preceding week, 56 billion a year earlier and a five-year average build of 63 billion cubic feet.
Total U.S. natural gas storage stood at 3.963 trillion cubic feet, just 1.2% higher than levels at this time a year ago and 4.4% above the five-year average for this time of year.

Natural gas futures are down 10% so far this week as warmer-than-average weather in key gas-consuming regions in the U.S. ignited speculation that a mild winter will curtail demand for the heating fuel and leave a glut of it in storage, weighing on prices next year.

Gas futures often reach a seasonal low in October, when mild weather reduces demand, before recovering in the winter, when heating-fuel use peaks.

[dwms07]

The future clean energy for the world is natgas. The US has one of the largest deposits in the world.

LNG exports are growing in leaps and bounds:

check it out yourself!

[dwms07]

Time to dollar cost average if UNG falls. Don't pick the bottom. And don't let the professional Chicago traders scare you away like frightened children, as they predict that spineless retail investors will. Face them head on this time.
This is the only period of year that a trader can be guaranteed at least one major NG rally from mid November to mid January. Take advantage of this current "irrational doom."

NG back to $3.50-$4.00/mmBtu by early to mid-January when irrational exuberance will resume once again. Sell then.

[dwms07]

Now is the time to buy a truck load of UNG and put it away until January.

If natgas spikes to $5, UNG will spike to $15.

Natgas will indeed spike to $5 if we get a big snow storm running up the Atlantic coast from South Carolina to New York like we did last year and 9 out of the last 10 winters.

[TREND1]

UNG WEEKLY IN UP TREND

[MAbWA]

$UNG: testing a daily resistance trendline
https://www.tradingview.com/x/2iQtkNj8/

[ogbull]

The Recipient Of The First US LNG Shipment Has Reportedly Been Identified


http://oilpro.com/post/22616/recipient-first-us-lng-shipment-has-reportedly-been-identified

[ogbull]

First-Ever U.S. Shale Gas Arrives In Europe



http://oilpro.com/post/23378/first-ever-us-shale-gas-has-arrived-europe?utm_source=WeeklyNewsletter&utm_medium=email&utm_campaign=newsletter&utm_term=2016-03-23

[ogbull]

New Reasons To Get Bullish On US LNG Exports:



http://oilpro.com/post/7127/why-we-bullish-us-lng-exports

[ogbull]

BULLISH FOR NATGAS:

EIA forecasts that new industrial projects will help drive growth in industrial natural gas demand through the end of 2016. By the end of 2015, industrial natural gas consumption is expected to reach an annual average of 21.7 Bcf/d (3.4% above 2014 consumption). Industrial natural gas consumption is expected to increase by another 3.9% in 2016, to an average of 22.5 Bcf/d. In 2016, three methanol plants are expected to come online in the Gulf of Mexico area, with a combined capacity of almost 0.4 Bcf/d. Additionally, a large nitrogen fertilizer plant, estimated to use 0.1 Bcf/d of natural gas, is currently under construction on Louisiana's Gulf Coast and is expected to come online in 2016, according to Bentek Energy.

https://www.eia.gov/todayinenergy/detail.cfm?id=22272


Natural Gas Is Bringing Manufacturing Back to the U.S.

The low price of natural gas is reviving American manufacturing and creating hundreds of thousands of jobs as companies build or expand plants. Natural gas is a major input to fertilizer manufacturing, and natural gas liquids are an important feedstock for chemical manufacturing. The American Chemistry Council reports that manufacturers are planning 148 new chemical manufacturing projects to take advantage of abundant, affordable natural gas and liquids supplies. ACC anticipates over $100 billion in new capital investment will create 637,000 permanent new jobs in the chemical industry and add $81 billion in annual economic output by 2023.

European companies are moving their manufacturing to the United States to take advantage of our abundant natural gas supply. BASF is converting a crude-based naphtha cracker in Port Arthur, TX, to run on natural gas-based ethane. Linde, a German industrial gas company, plans to invest $200 million in Texas to create the world’s largest natural gas-based syngas chemical plant.

http://www.westernenergyalliance.org/why-western-oil-natural-gas/powering-america/manufacturing

[ogbull]

Low natural gas prices in the United States combined with increased demand for urea and ammonia are driving the construction of new fertilizer plant projects in the U.S. and across the globe. In short, companies are seeking to monetize low cost natural gas by turning it into more valuable products, such as ammonia and urea.

“New fertilizer capacity addition in the U.S. is about 14 percent of the planned worldwide growth, with several world-scale U.S. projects starting up in 2016,” said George Gruber, Black & Veatch Technology Manager for Syngas Production and Conversion. “Recent increased demand for fertilizer products has meant significant growth of our business in this area.”

He said the new output would impact the import/export market.

“Low U.S. natural gas prices will continue to drive U.S. conversion projects to higher value products such as fertilizer,” Gruber said. “We should see the U.S. transition from a fertilizer importer to an exporter in the coming years.”

Demand from SCR Technology
Through a sophisticated chemical process, natural gas can be transformed into ammonia, which is used to create urea. Urea is used as a fertilizer, as well as to make plywood and specialty chemicals. Additionally, urea is increasingly being used to reduce the pollutant nitrogen oxide (NOx) using selective catalytic reduction (SCR) technology.

In order to meet U.S. Environmental Protection Agency (EPA) diesel engine emissions regulations, all new U.S. diesel engines will have SCRs, Gruber said. The requirement is already in place for heavy duty over-the-road vehicles, became effective in 2014 for off-highway vehicles, and will become effective in 2015 for railroad engines and in 2016 for marine engines.

Additionally, the improved fuel efficiency will encourage light truck and car manufacturers to add SCR to their diesel engines to meet the federal fuel economy regulations. A global market forecast by CF Industries projects urea-based SCR usage to grow from 1.25 trillion gallons in 2014 to more than 3 trillion gallons in 2020.

Gruber said that low natural gas prices in Trinidad and high natural gas prices in the U.S. led to the shutdown of most of the U.S. ammonia production capacity during the past 20 years. But in 2012, shale gas production surged and the large new supply of natural gas lowered the spot market price to $2.50/million BTU. At the same time, ammonia and urea prices rose due to increased demand and reduced supply from Algeria, Libya and Trinidad, major exporters. In fact, Trinidad natural gas prices are currently higher than U.S. prices.

“These strong economic drivers all combined to motivate the development of new U.S. fertilizer plant projects,” Gruber said.

Plant Revamps Are Active
Black & Veatch recently performed engineering for the PCS ammonia plant revamp in Georgia, as well as engineering and procurement for the Rentech ammonia plant revamp project in Illinois. Current projects include engineering and procurement for the PCS ammonia plant revamp in Ohio and revamp of two Koch ammonia plants at Enid, Oklahoma. Black & Veatch is performing feasibility studies for several additional ammonia plant revamps to increase capacity.

According to the International Fertilizer Industry Association (IFA) 2014-2018 Outlook, almost 200 expansion projects are expected to come on line in the next five years across the globe. World capacity of fertilizer products and raw materials would increase by 146 million tonnes, or 18 percent, over 2013. These developments equate to a total investment of $110 billion, IFA said.

“The expertise needed for ammonia projects applies to other syngas processes, including production of diesel, jet fuel, gasoline, methanol, and high quality base oils for lubricants,” said Michael Goff, Black & Veatch Process Engineer and a synfuels expert. “In addition to natural gas reforming, syngas can also be produced by gasifying feedstocks – such as biomass, municipal solid waste, coal, coke and heavy oils. Black & Veatch is actively implementing technology to create these high-value products from syngas produced from low-cost feedstocks.”

[ogbull]

Good News for US natgas exports!

The US and Turkey trying to set up a deal to import LNG. Turkey has big natgas demand but it had a contract with Gazprom that was gonna be gard to break. Now Russia give Turkey solid reason to resend contract. They are cutting Turkey’s natural gas supply, like it has done in Ukraine 2006.

Turkey is an 80-million strong market and Gazprom’s second biggest market, with considerable growth potential.

In December 2015, Gazprom demanded a price premium for Turkey’s supply. By February, Gazprom disrupted deliveries to independent Turkish gas traders, reducing supply by 50%. Turkey depends on Russia for 55% of its natural gas supply.

The Turkish dependence on Russian supply is more pronounced due to small storage facilities in the country.

This is the latest in a series of standoffs between Moscow and Ankara, following the downing of a SU-24 bomber in Syria in November 2015. Since, Moscow has kicked off a campaign against Turkey as a tourist destination, closed the Russian market for Turkish agricultural products and construction companies, cancelled the construction of a nuclear plant, and continue now with the disruption of natural gas supplies.

Currently, the state natural gas distributor Botas is in arbitration with Gazprom for the Russian company’s unilateral decision to reduce supply volumes. Meanwhile, Turkey is keeping its cool in the standoff, given an unusually hot winter. However, Ankara is now considering turning to Azeri supply and to the USA.

The standoff is also likely to kill the Turkish Stream project agreed upon Gazprom and Turkish in the summer of 2015.

[ogbull]

Coal demand in free fall:

http://business.financialpost.com/news/energy/transcanada-corp-to-terminate-coal-power-contracts-due-to-higher-emissions-costs?__lsa=daa7-582b


CALGARY – Companies are wiggling out of money-losing contracts to buy electricity from coal-fired power plants in Alberta as a result of the province’s new climate change policies, leaving a provincial agency to honour the agreements.

TransCanada Corp., a company best known for building pipelines but that also has a power business, cited a recent change in Alberta’s climate laws in order to terminate contracts to buy coal-fired electric power from Atco Ltd. and TransAlta Corp.

Both TransCanada and AltaGas cited the change in Alberta’s laws – such as the new policy that all carbon emissions be taxed at $30 per tonne beginning in 2017 – as the reason for the cancellation.

“It will make coal a lot more uncompetitive,” Nieukerk said of Alberta’s new carbon-pricing policies.

Both companies produce electricity from natural gas, a process that emits less carbon per megawatt hour than coal-fired power.

“The climate change policy gives them a good reason to get out (of coal contracts),” said Larry Charach, an Edmonton-based consultant who helped shape Alberta’s deregulated electricity market when he worked for the provincial government in the late 1990s.

Charach said there is currently a surplus of available power in Alberta, which is made worse by weak demand for electricity given the current economic downturn. He said the collapse in natural gas prices this year is also rearranging Alberta’s electricity market.

Each of these factors has contributed to a fall in electricity prices in the province, which has made many of the coal-fired power contracts unprofitable for the buyer.

“The climate change policy is a factor, but the low prices are the trigger,” Charach said

In December, Calgary’s city-owned utility company Enmax Corp. informed the Balancing Pool that it would also terminate one of its PPAs for coal-fired electricity.

The terminated contracts now require the province’s Balancing Pool to buy coal-fired power from Atco and TransAlta at a specific price, which many analysts say is higher than the current price of electricity in Alberta.

“TransCanada is terminating money-losing agreements that obliged it buy power in Alberta at above market prices,” FirstEnergy Capital Corp. analyst Steven Paget said in a research note.

Paget added the decision to hand those purchase agreements over the provincial agency would prevent further losses for TransCanada, which “was likely to lose money on every megawatt-hour it purchased this year due to low gas prices in Alberta combined with the addition of the 800 MW Shepard gas-fired plant near Calgary.”

TransCanada executive vice-president Bill Taylor said in a release that the company will still participate in the Alberta power market, as a natural gas-fired power producer.

“These low-cost and low CO2 emitting gas units are expected to perform well in today’s market environment,” Taylor said.

David Gray, a power expert and president of Gray Energy Economics Inc., said Albertans will see the effects of the termination of those agreements on their electricity bills, in the form of a rider from the Balancing Pool.

“It leaves the Balancing Pool holding the bag for the last part of the agreements,” Gray said.

[ogbull]

New Natgas Report:

In a new report this week, Bernstein analyst Bob Brackett spelled out the firm’s long-term outlook for natural gas stocks. While Brackett believes that natural gas is in for several more years of depressed prices, he also discusses what could be the “light at the end of the decade” for natural gas beyond 2020.

Five-Year Outlook

After putting together Bernstein’s five-year projected natural gas supply/demand model, Brackett describes the firm's 12-month outlook for gas prices as “somewhat constructive.” Brackett sees a slight tightening of the natural gas overhang during the next year, enough to push prices toward the $4/mcf level. However, investors looking for prices significantly higher than that level might have a while to wait.
Supply/Demand Growth

Bernstein is calling for about 19 bcfd of gas demand growth from 2015 to 2020 (4.7 percent compound annual growth rate) and about 15 bcfd of demand growth from 2020 to 2025. The bulk of this demand growth comes from net exports and coal retirement.

From the supply side, Bernstein’s models predict 15 bcfd supply growth over the next five years from Marcellus/Utica and 5 bcfd of growth from East Texas/Louisiana. Brackett notes that Marcellus/Utica pipeline buildouts could also create additional pricing pressure for natural gas if capacity expands beyond the 16 bcfd of new pipeline that Bernstein is predicting by 2018.

How To Play It

For investors looking to directly play natural gas prices via an ETF such as the United States Natural Gas Fund ETF (NYSE: UNG), Bernstein is forecasting a short-term peak for gas prices at around $4/mcf within the next 12 months. Once it peaks, the firm sees the price confined to a range between $3.50 and $4.00/mcf through 2020.

“After that, when marginal full-cycle Haynesville and Barnett are setting the cost, it should move up to $5-6/mcf,” Barnett explained.
Bernstein names Outperform-rated Range Resources Corp. (NYSE: RRC), Southwestern Energy Company (NYSE: SWN), Chesapeake Energy Corporation (NYSE: CHK) and Cabot Oil & Gas Corporation (NYSE: COG) as top stock picks.

[ogbull]

El Nino is ending! After transitioning to neutral conditions, it's likely that sea-surface water temperatures in the equatorial east and central Pacific Ocean could continue to cool to the point that La Niña may emerge in the fall, NOAA said. However, they cautioned that much uncertainty remains, though there is computer model and physical evidence that La Niña conditions could develop.

La Niña is the opposite of El Niño, namely, a cooling of the equatorial east-central Pacific Ocean.

Of course, if La Niña does develop, the strength of it (weak, moderate or strong) will determine what impacts it may have on the weather in North America and elsewhere next winter (2016-2017).

We could get a bitter cold winter

_________________________________________________

The end of an El Niño event is often followed by the reversal of the phenomenon, known as La Niña, although that isn’t a given. While El Niño and its impact might be better known, prices for crops such as soy, corn and wheat can move around 50% more during a La Niña event, based on a measure of the volatility of prices, said Erik Norland, senior economist at CME Group from New York.

“The likelihood that the current El Niño peaks soon and turns into a potentially strong La Niña by late 2016 or early 2017 is something that participants in agricultural markets should track closely,” Mr. Norland said.

The impact of La Niña may not be limited to agriculture. The La Niña that lasted from 1998 through to 2000 caused colder-than-normal winters in the U.S. and Canada, sending prices of natural gas higher, according to CME Group.

[ogbull]

Gas Demand in Turkey!

The ongoing tension between Turkey and Russia makes Turkey’s dependence on foreign energy perhaps the country’s biggest concern. Turkey imports 99% of its gas, and Russia pipes in nearly 60% of Turkey’s total gas use.

Turkey is the second largest consumer of Russian gas and paid Gazprom some $10 billion last year.

More gas has been a strategic choice in Turkey (and around the world) because it’s cleaner, more flexible, and highly reliable. For example, gas generates over 50% of Turkey’s electricity, but accounts for only 30% of installed capacity, illustrating gas’ ability to “punch-above-its-weight,” accounting for more actual power generation than its share of capacity would suggest.

Even in 2022, per average capacity factors, gas will be available 87% of the time, compared to 20-36% on even the best days for wind and solar. So, regardless of what others keep telling you, know this: sources like wind and solar will never displace it.

Turkey is a Natural Gas-Based Economy. It's natural gas imports are surging.

From 2012-2015, Turkey slowed a bit from “Europe’s ‘fastest growing economy“ to “Europe’s third-fastest growing economy.” One of the many things that the anti-coal, anti-oil, and anti-natural gas movement regularly fails to understand (or more likely chooses to ignore) is the direct relationship between more economic growth and more energy demand, working in tandem to drive each other upwards (really underscoring why we need investments in all sources and fields of energy!).

Turkey’s gas from Russia and Iran is under long-term contracts at relatively high prices. And business relations have been strained due to the penalties Turkey has had to pay under onerous contracts, enabled by the inflexible nature of piped gas infrastructure (a problem that LNG cargoes are helping to alleviate).

Meanwhile, the entrance of the U.S. on the rapidly expanding LNG market, perhaps the fastest growing energy market of them all, could help Turkey diversify most, helping the U.S. to “Fulfill Its NATO Treaty Obligations.” In the Fall, Turkey was importing natural gas at $12 per mmBtu and $14 per mmBtu from Russia and Iran, compared to gas futures for April delivery in the U.S. now trading at around $1.67 and projected to stay under $7 for decades.

With just two import terminals, Turkey needs more LNG import capacity for flexibility. While the European Union has wisely been installing specialist terminals to receive gas from the U.S. and Qatar, Turkey hasn’t been so responsive. This is becoming an even greater gas security issue in growing Turkey since the country’s gas demand is up 45% since 2010 while the European Union’s gas demand has been falling. Turkey’s “regasification capacity [is] insufficient to satisfy large amount of imports.”

There are other commercial risks and challenges in Turkey that need fixed. Although gas demand can double in winter months, Turkey still has one of the weakest gas storage systems, capable of meeting less than 10% of total consumption, compared to a nearly 80% capability for Ukraine, also highly dependent on more politically risky Russian energy. Unlike oil, gas emergency stocks to buffer crises is not a requirement under IEA rules, although it’s long been recognized it should be.

To be sure, U.S. LNG will face competition reaching Turkey, but the opportunities are still great. In December, Turkey’s state-owned energy company, BOTAS (which has an 80% market share in import contracts), signed a preliminary agreement with Qatar’s national petroleum company to purchase LNG over a long-term period – yet, no such infrastructure currently exists.

Qatar is routinely jammed at 100% or above liquefaction utilization rate, and the country’s role as the driver of liquefaction capacity growth is being passed to the U.S. and Australia. Qatar’s overall shift toward supplying developing Asia (“Qatar slashes gas price for India, waives penalty“) mirrors broader trading patterns in the oil industry.

Turkey says “Azerbaijani gas ‘not an alternative for Russian” (here). And due to political tensions between Baghdad, the Kurdish region, and Ankara, it’s not clear whether Iraq gas will start to flow to the Turkish market. In any event, Iraq has insignificant gas output, yielding in a year half of what the U.S. does in a single day.

Turkmenistan seeks to supply Turkey gas via TANAP, but numerous contracts with China challenge that. And to join the pipeline, Turkmenistan will have to lay another pipeline across the Caspian Sea, complicated by debates around the legal status of the area. And with 50% of its population age 24 or younger (i.e., domestic needs are rising), Algeria has had nine straight years of declining oil and gas production, with annual gas exports plunging nearly 20% (here).

Continuing, as a “Newly Industrializing & Less Developed Country,” Iran has nearly 45% of its population age 24 or younger, so the country will surely need to keep more of its own gas; leveraged to supply nearly 65% of all energy, to generate 70% of electricity, for huge enhanced oil recovery projects (Iran will lean on gas to double its very low oil recovery rate to 40%), and to fuel the world’s largest natural gas vehicle fleet.

[ogbull]

YOU BETTER READ THIS!

Every week, the EIA proclaims a new record for natural gas production. But their own forecasts show that the U.S. will be short on supply by October of 2016. A price increase is inevitable beginning later in 2016. LINK

Popular Myth vs Reality

The popular myth is that gas production will continue to increase and that prices will remain low for years. In the myth, price has no effect on production. The reality is that price matters and production is down 1.2 bcfd since September 2015.

The production increases reported by EIA are year-over-year comparisons that don’t reflect the terrible drop in prices during the last 4 months. Prices are less than half what they were in early 2014. The average price for the first quarter of 2016 is only $2.25 per MBTU2. Current price in $1.67.

The truth is that Hedges made when prices were in the $5-range carried many companies through falling prices as they continued to produce like there was no tomorrow. You can't blame them! But tomorrow has finally arrived and the hedges are gone.

Over-production in the Marcellus Shale also means that producers have to compete for limited pipeline capacity by deeply discounting their sales price. The best core area locations are commercial at $4 per mcf3 but wellhead prices averaged only $1.75 per mcf in 2015.


There is no simple solution to falling supply. That’s because almost half of U.S. supply is conventional gas and it is in terminal decline. Now, shale gas is also in decline.

Conventional gas supply has fallen 16.75 bcfd since July 2008. Until July 2016, increases in shale gas production more than offset those losses.

Conventional gas will continue to decline at about 5% per year because few companies are drilling those plays. Shale gas must, therefore, continue to grow by at least 15 bcfd per year just to offset annual conventional gas decline (~2.5 bcfd per year) and legacy shale gas production decline (~12.5 bcfd per year).

It will take 15 bcfd of new shale gas production in 2016 to keep U.S. production flat.

Shale gas production replacement and growth for 2015 were 14.5 bcfd, down from almost 18 bcfd in 2014. It will be difficult to match 14.5 bcfd in 2016 because shale gas production has been falling 0.72 bcfd (~2.2 bcfd annualized) for the last 4 months of data (Figure 4).

The biggest declines since peak production are from the older “legacy” shale gas plays namely, the Barnett, Fayetteville and Haynesville (Table 1).

Although additional reserves exist in the Barnett and Fayetteville plays, the core areas have been largely developed and marginal areas require substantially higher gas prices to be commercial. There is only one horizontal rig operating in the Barnett and there are none in the Fayetteville.

Production in the Haynesville Shale has decreased by 3.64 bcfd since its peak. High costs and relatively low EURs make the play uneconomic below about $6.50 gas prices. Parts of the core areas remain under-developed at today’s prices.

Marcellus production declined 0.52 mcfd since July 2015. Most of this probably represented intentional shut-ins because of low wellhead prices. Marcellus production can grow but new pipelines are needed to turn reserves into supply. Even with additional infrastructure, production will peak in the next few years just like in the older plays.

Production in the Utica and Woodford plays is increasing but it is largely offset by declining associated gas from the Eagle Ford, Bakken and other tight oil plays.

A Supply Deficit Even In The Optimistic EIA Case

The EIA forecasts that net dry gas production will increase 1.4 bcfd in 2016 and 1.6 bcfd 2017. Even with that optimistic forecast, their data still shows that the U.S. will have a supply deficit beginning in the last quarter of 2016 (Figure 5). A more realistic forecast implies a much greater deficit that begins sooner.

A supply deficit does not mean that there won’t be enough gas. There is ample gas presently in storage to cover a supply shortfall for awhile. That is what happened during the supply deficit in 2013-2014 (Figure 5). That deficit was created by flat production similar to what EIA predicts for the first 3 quarters of 2016.

What is different this time, however, is that net imports will reach zero in early 2017 because of decreasing imports from Canada and increasing exports. Add to that the challenge of replacing conventional gas depletion, and there is a much more serious supply problem than EIA’s already questionable forecast suggests.

Another big difference is that in 2013-2014, capital was freely available with average oil prices above $90 per barrel and average gas prices more than $4 per MBTU. Today, the oil and gas industry is in financial shambles with both oil and gas prices at very low levels, and it is unlikely that companies can raise the capital necessary to ramp up gas drilling quickly if at all.

Export plans of at least 7 bcfd by 2020 are not helpful considering the challenges of meeting domestic supply in coming years (Figure 6).

The prospect of exports increasing to 13 bcfd by 2030 is even more troubling absent some new shale gas play that we don’t know about yet.

Higher Gas Prices Are Inevitable

A few years ago, the oil and gas industry convinced the world that the U.S. had 100 years of natural gas. Some of us cautioned that it is worth reading the fine print, that there is a difference between a resource and a reserve. The harsh light of reality eventually reveals that what seems too good to be true usually is.

The obvious solution to declining gas supply is higher prices.

The EIA’s STEO forecast calls for $3.17 per MBTU gas prices by December 2016 and for $3.62 by December 2017. Those prices will not support necessary drilling in legacy shale gas plays. EIA’s AEO 2015 reference case does not call for gas prices to reach $5 per mcf until 2025. We can’t afford to wait 9 years.

It is, therefore, inevitable that natural gas prices must increase sooner, preferably in the next 12 to 24 months. If oil prices remain low, a shale-gas revival may save the domestic E&P business. During the last supply deficit in 2014, gas prices averaged $4.36 per mcf compared to only $2.63 in 2015.

But it will take time for producers to reverse the decline in drilling and production. It may be difficult to raise capital for renewed drilling given the current distress in the oil and gas industry.

Something will have to give sooner than later. That will be natural gas export.

[ogbull]

NATURAL GAS DEMAND CONTINUES TO INCREASE! link

[ogbull]

NATURAL GAS WINS!

The Associated Press reports more than 32 mostly coal-fired power plants will close and another 36 plants could also be forced to shut down as a result of new EPA rules regulating air pollution. They are no longer able to compete with natural gas. Nuclear power can not compete either. As existing nuclear plants near the ends of their lifetimes, they will be retired. nuclear is dead because it is competitive with natural gas and because of deposing of spent fuel rods.

Natural gas is the fuel of the future for U.S. electricity.

Domestic supplies of natural gas have increased dramatically in recent years, due to hydraulic fracturing (fracking). This increase will continue for years, making natural gas very cost-competitive compared to other energy sources.

Link

[ogbull]

One thing I notice about all the news on natgas prices, everyone seems to be reporting what's happened last week. Who cares about last week. Tell me what's gonna happen in January 2017. Old news does me no good at all.

[$Pistol Pete$]

$UNG Daily & Weekly Chart

[BorisB]

Daily UNG

[NathanH]

Probably

[rteest]

Will I lose if I put money into this for say 5 years?

[Swany]

contango is difficult to understand, let alone explain, please research it. I am long UNG, not that I wanted to be, it reversed split and changed margin rules on me and I got stuck. I try averaging down when I believe it is at short term low. Good luck

[rteest]

What exactly does contango do? Are you saying it will never go back up to what it was years ago? So don't go long on this? I don't know that's why I'm asking.

[$UPERMAN]

5 year chart is crasy. Worth a look.