With the over-the-top winter playing havoc on natural gas prices and storage, higher prices are needed to encourage more drilling and induce utilities to switch to coal for inventories to refill adequately, analysts said Monday.
While bullish Canadian financial analysts and stockbrokers project 2013-2014 heating season prices into a rosy future, one of the country's biggest dependents on natural gas revenues is sticking to modest expectations.
Natural gas buyers not wanting to be caught short over the weekend bid prices at most points higher in Friday trading. Outsized advances in the Midwest, New England and the East more than compensated for scattered modest losses in the Gulf Coast and elsewhere.
Spot natural gas prices for Friday delivery on average fell about a quarter in Thursday's trading as winter-weary market participants welcomed the first day of spring with quotes mostly lower across the board.
Physical gas prices for Thursday delivery fell in Wednesday's trading as winter-weary traders and marketers filled out basketball brackets and welcomed the relative quiet of shoulder season trading. On balance, physical prices fell about a quarter Wednesday with Northeast quotes tugging the market lower and Marcellus points giving a push upward.
With Thursday marking the first official day of spring, physical natural gas for Wednesday delivery weakened in Tuesday's trading with quotes down about a quarter on average and nearly all points recording losses. The largest declines were seen in the Marcellus and Northeast, but notable exceptions to the slate of lower reads were a couple points in the Midwest east of a major storm system that pummeled the Rocky Mountains Tuesday and was expected to grind its way into the Great Lakes and Midwest by Wednesday. At the close of futures trading April had retreated 8.0 cents to $4.456 and May was down 6.8 cents to $4.424. April crude oil added $1.62 to $99.70.
Overall physical gas prices fell about a nickel in Monday's trading for Tuesday delivery, but the market was punctuated by wide swings. In western producing regions and California stout double digit gains were seen, but in market areas such as Chicago and the East moderating temperature trends prompted multi-dollar losses at some points. At the close of futures trading April had risen 11.1 cents to $4.536 and May was higher by 8.9 cents to $4.492. April crude oil tumbled 81 cents to $98.08/bbl.
The U.S. Energy Information Administration (EIA) on Friday said it believes that 16% of the natural gas consumed in Europe in 2013 was transported through pipelines that traverse Ukraine.
Physical gas for weekend and Monday delivery on balance posted solid gains in Friday's trading. East and Northeast locations were expected to see another round of plunging temperatures towards the end of the weekend and into Monday, and New England points led the day's advance with double-digit dollar gains.
While there are risks inherent in finding the yellow brick road to global energy growth, U.S. natural gas demand is likely to take off between now and 2020, a Goldman Sachs economist told an audience Tuesday at the LDC Gas Forum Rockies & West meeting in Los Angeles.