Natural Gas Report: Natural Gas Holds Steady

May 26, 2011

 

Baker Hughes rig count data is expected to be released tomorrow at 1 p.m. EDT as usual. Last week, we saw the number of rigs drilling for natural gas decline by 8 to 866, to the lowest since February of last year. The count is now 126 rigs off last year’s peak set in August, but production has continued to stay elevated amid increasing in productivity. Next week we will see if that remains the case with the release of the latest production figures for March from the EIA.

 

 

As we wrote last week, “The outlook for natural gas remains relatively balanced. A colder-than-normal end to this past winter helped create a year-over-year deficit in inventories. Moreover, the rig count is slowly but steadily declining as operators continue to shift capital to more compelling liquids-rich (oil and NGLs) prospects.

Yet after initially rallying as high as $4.70/mmbtu, natural gas prices have come back toward the lower end of their recent range near $4/mmbtu.

This is largely because production continues to grow despite the muted price environment, reinforcing that view that supplies remain ample. With prices near the lower end of their range, however, there may be upside in the event of a warmer-than-normal summer that increases the year-over-year inventory deficit even further.”

To see how this outlook evolves, we will be closely watching next week’s output figures from the EIA, and of course, upcoming weather forecasts for this summer.

 

NOAA’s 6-10 Day Weather Outlook:

NOAA’s 8-14 Day Weather Outlook:

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