US energy independence???..in doubt

[dan_s]

I think Bill is right in the long run. He thinks we will see natural gas in the $5-$7 range this year. It would be nice, but I doubt it. There is a lot of Eagle Ford and Marcellus gas coming on-line this summer. The Utica, Permian Basin and Niobrara are also increasing gas production.

One thing that really looks interesting to me is the increasing price of NGLs. The average price for NGLs went from $33/bbl in June to $41/bbl in December. I am discussing this in my newsletter that comes out on Monday. NGL exports are growing rapidly and the cold winter has really increased demand for propane. The price of propane went up 4% from Jan. 1 to Jan. 10 and is now over $1.30/gallon.

Higher NGL prices means more liquids will be stripped from the gas stream. This lowers volume and btu content of the remaining dry gas. This should increase the price per mmbtu.

I will be pleased if natural gas can just stay over $4.00/mmbtu this year. $4.50 in Q4 definitely is possible. If winter continues into April like it did last year, the gas market could get very interesting.

If you want to add more exposure to gas, I recommend: RRC, UNT, SM, XEC, EOG, CRK, EXXI and GST They will all do just fine if gas stays under $4.00, but they will get a big boost if Bill Powers is right. Updated profiles on each company are available on the EPG website for members only.