Energy Solutions, Inc., an educational provider of natural gas price information and price trends, has issued a Natural Gas Price Alert to notify natural gas buyers of an important natural gas purchasing opportunity. These valuable alerts are issued when there is something happening in the natural gas industry, or something that is anticipated to happen that has the potential to impact natural gas prices.
On Tuesday, March 13, the April 2012 natural gas NYMEX contract dipped to $2.204 per MMBtu, a new 2012 calendar-year low. It has been more than ten years since natural gas prices have traded at these levels; on February 15, 2002, the March 2002 natural gas NYMEX contract hit a low of $2.147 per MMBtu.
Widespread above-normal temperatures in the eastern half of the nation are expected to cause the year-over-year storage surplus to expand to more than 800 Bcf by month end. Meanwhile, the active natural gas drilling rig count has fallen to 670 rigs, which is just 30 more than the ten-year low of 640 reached in May 2002. Low natural gas prices have prompted natural gas producers to announce that they intend to cut supply, but those cuts have yet to show up in the monthly production data, released at the end of each month by the Energy Information Administration (EIA).
However, these cuts will eventually surface; when that happens it will reverse natural gas price direction. While natural gas prices are unlikely to spiral out of control, kept in check by more-than-ample supply and sluggish demand, consistent monthly data showing that production is on the decline could create a multi-month natural gas price low. Should this occur, end-user buyers need to be ready to act.
Valerie Wood, President of Energy Solutions, Inc., points out that evidence of production cuts are expected to surface in the second half of 2012. As a result, price strength is also expected to surface in the second half of 2012. Ms. Wood goes on to say, “The extent of price strength is going to be directly related to summer temperatures and the impact on the use of natural gas-fired electric generation to meet air conditioning needs. As this is the third summer of a La Niña cycle, initial forecasts call for cooler than average summer temperatures, which if realized, would dampen, but not likely reverse, price strength.”
That being said, with natural gas prices at ten-year lows and production cuts closer to becoming a reality, complacent end-user buyers need to be sure they understand what, exactly, it is that they are waiting for. Energy Solutions, Inc. specializes in helping end-use businesses develop and implement cost effective natural gas risk management strategies that protect profit margins and eliminate budget variances. This recently-issued one-page Natural Gas Price Alert urges natural gas buyers, particularly large end-use businesses, to be proactive during this current time of natural gas price weakness to protect profitability and budget variances.
To learn more about the actions to take, click here to view the recently issued Natural Gas Price Alert, contact Susan at (608) 848-9589 or visit our website at www.energysolutionsinc.com.
About Energy Solutions, Inc.
Formed in 1996, Energy Solutions, Inc. is independently owned. With combined experience of more than 50 years in the natural gas industry, our team focuses on helping businesses better understand the natural gas industry in order to improve their competitive edge.