RUS | ENG | All
Enter the email or login, that you used for registration.
If you do not remember your password, simply leave this field blank and you will receive a new, along with a link to activate.

Not registered yet?
Welcome!

2014-04-06 17:04:00

LOW GAS PRICES

LOW GAS PRICES

WSJ. Natural-gas prices are too low and put the U.S. at risk of not having enough gas in storage next winter and even beyond, say Citigroup analysts in a note published today.

Supplies are at 11-year lows, after a tough winter fueled demand for gas-powered indoor heating and ate away at a majority of the nation's stored gas.

Many analysts and traders argue that booming production levels, which are projected to hit another record high this year, will allow stockpiles to replenish.

Citigroup has argued against this theory for months. A group of Citigroup analysts, led by energy strategist Anthony Yuen, published a note Thursday stating that production growth is likely to be less vigorous than current prices reflect.

"The market seems to think future supply should be robust, summer could be mild and winter would unlikely be cold," the analysts write.

Production will likely expand by 3 billion cubic feet per day compared to last year, the bank says, but that will leave inventories with just 3.45 trillion cubic feet of gas in storage by the end of October. In comparison, the five-year average for the final week of October is 3.848 tcf. Lower-than-expected production growth could even reduce supply levels through 2015, the bank says.

As producers see more profit in drilling oil, which has climbed close to $100 a barrel in recent weeks, the count of natural-gas drilling rigs could fall too low to maintain robust production growth, even as drilling becomes more efficient, the bank says.

Other risks include an unusually hot summer and reduced exports of natural gas from Canada.

Front-month natural-gas prices recently traded up 1% at $4.407 a million British thermal units, with contracts for delivery in the spring and summer months holding between $4.40 and $4.50.

Any of the above factors "could change abruptly," catching the market off-guard, according to Citigroup. "Prices should incorporate these high probability risks."

Tags: GAS, USA