You may have heard the news about oil prices dropping, but natural gas prices are hitting highs that have not been seen in years. On November 14, CNBC reported that natural gas prices hit a four-year high after “panicky” trading following a new, colder weather forecast. Contracts for the delivery of natural gas in December, called “futures,” rose 18% in a day to reach $4.837 per million British thermal unit (MMBTU). That price is the highest natural gas has been since February 2014, and trading volume also hit an all-time daily high.
Natural gas always has two consumption peaks every year. The most gas is used during the winter, when more is used to heat homes and businesses. A much smaller peak occurs in the middle of summer when everyone turns on their air conditioners, and that uses more electricity, which then draws more natural gas. These wild fluctuations are balanced out somewhat by storage. In the slower months, particularly the months between April and October, a lot of natural gas is injected into natural geological formations that can hold the gas for easy retrieval later. November and March are the months when the most gas is drawn from storage because usage is outpacing production.
On November 16, Barrons wrote that natural gas prices could continue to rally. Low prices over the past several years have led more consumers to rely on natural gas, while depressing exploration and production investments. Storage is also about 16% lower than recent averages right now. That said, production continues to climb ever higher. American producers are forecasted to produce 83.2 billion cubic feet per day (BCFD) of gas this year, up 8.5 BCFD from last year. Sustained high prices could drive some switching to coal, but that switch is much harder to make today than it has been in the past because of environmental regulations.
Record high prices and record high production is just the kind of thing that natural gas producers want to hear. If you want to get your hands on acreage in the Marcellus Shale formation, you should call 412-212-7517 to speak to the experts at Cimmaron Land.