Natural Gas Price Outlook: What’s Next After $2?
Alexey Afanassievskiy | Feb 02, 2024 05:23AM ET
From last week till today there was a noteworthy drop in Natural Gas Futures prices – from $2.2 to $2 for a MMBTU. However, I foresee that the price may become even lower. With a sharp reduction of exports, the price of gas will fall to the range of $1.5 - 1.8.
What are the main reasons for this price decrease? Between 2009 and 2022, the drilling speed saw a fivefold increase. The studied area has expanded, allowing for precise well modeling. Moreover, equipment productivity and capacity have risen, accompanied by a reduction in equipment costs. Consequently, the expense of drillhole construction has halved, while productivity has surged ten times.
The new low price will stop both the introduction of new wells and drilling increase. And accordingly, there will be a cut in production for the month and price stabilization. The excess gas will be pumped into the underground storage. The injection can be kept there for a month and during this period there will be a decline in production. Subsequently, in spite of the current drop, we can expect the average gas price in 2024 in the United States at the level of $2.6 - 2.8 for a MMBtu.
Source: Investing.com
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