Natural Gas: Why I expect higher prices in 2016
Posted: Thu Sep 24, 2015 2:15 pm
Better Days Coming for Natural Gas
9/24/2015 By Robert Rapier
Robert Rapier and I are regular guest on Jim Puplava's Financial Sense Network. - Dan
While oil prices this year have traded at lower levels than I expected, natural gas prices have been mostly in line with my expectations. Following the unseasonably cold winter of 2013-14 that depleted natural gas inventories, a mild summer and normal winter -- along with record natural gas production in the U.S. -- allowed gas inventories to return to normal. There have been no major surprises since that have moved the natural gas market in either direction, so prices have remained depressed this year as I expected.
The longer term picture for natural gas producers is still bullish. The EPA is aggressively phasing out coal, and natural gas still looks to be the biggest beneficiary. The first liquefied natural gas (LNG) export terminal in continental U.S. is set to open within the next six months, with more to follow.
Chemical manufacturers are also taking advantage of low U.S. gas prices. According to the American Chemistry Council (ACC), as of July 23rd 8 new chemical manufacturing projects were planned in direct response to low U.S. gas prices. These projects represent $145 billion in capital investment, mostly by foreign companies, and will eventually consume a significant share of the U.S. gas supply. In fact, the ACC also reports that nearly 40% of these projects have been completed or are under construction, and that is beginning to show up in the industrial natural gas demand numbers which have risen every year since 2009.
On the demand side, the U.S. Energy Information Administration recently reported that natural gas production across all major shale regions is projected to decrease this month for the first time ever. Thus, a future with higher demand and potentially lower supply is a pretty good bet, and that should drive natural gas prices higher over the next few years.
.
9/24/2015 By Robert Rapier
Robert Rapier and I are regular guest on Jim Puplava's Financial Sense Network. - Dan
While oil prices this year have traded at lower levels than I expected, natural gas prices have been mostly in line with my expectations. Following the unseasonably cold winter of 2013-14 that depleted natural gas inventories, a mild summer and normal winter -- along with record natural gas production in the U.S. -- allowed gas inventories to return to normal. There have been no major surprises since that have moved the natural gas market in either direction, so prices have remained depressed this year as I expected.
The longer term picture for natural gas producers is still bullish. The EPA is aggressively phasing out coal, and natural gas still looks to be the biggest beneficiary. The first liquefied natural gas (LNG) export terminal in continental U.S. is set to open within the next six months, with more to follow.
Chemical manufacturers are also taking advantage of low U.S. gas prices. According to the American Chemistry Council (ACC), as of July 23rd 8 new chemical manufacturing projects were planned in direct response to low U.S. gas prices. These projects represent $145 billion in capital investment, mostly by foreign companies, and will eventually consume a significant share of the U.S. gas supply. In fact, the ACC also reports that nearly 40% of these projects have been completed or are under construction, and that is beginning to show up in the industrial natural gas demand numbers which have risen every year since 2009.
On the demand side, the U.S. Energy Information Administration recently reported that natural gas production across all major shale regions is projected to decrease this month for the first time ever. Thus, a future with higher demand and potentially lower supply is a pretty good bet, and that should drive natural gas prices higher over the next few years.
.