NGI's Daily Gas Price Index (4/16/12) Nearly All Points Slide; Futures Waft Lower - The cash market slumped another five cents on average Friday with virtually all locations posting losses and Northeast locations suffering the greatest setbacks as hyper-warmth was forecast to return to the area on Monday. California points also weakened. Futures held relatively steady and at the close May had eased two-tenths of a cent to $1.989 and June had fallen eight-tenths of a cent to $2.084. May crude oil dropped 81 cents to $102.83/bbl.
Traders following longer-term Northeast markets reported only small changes and very modest activity. "Basis trading is dead and little things are happening here and there, but it has been a very, very slow week," said an eastern trader.
Veteran industry observer Rusty Braziel, now principal of RBN Energy, notes continued high production that doesn't seem to be responding to supposed production cuts and a lower rig count. "[G]as production has declined by only a couple of Bcf/d since the high point late last year and has actually increased in the past few weeks," he said in a blog posting.
Braziel points out three hurdles to lower gas production. "[D]ue to the huge increases in the productivity of natural gas rigs, one rig can now generate two to three times the incremental production of rigs just a few years back; associated gas from growing crude oil production is increasing; producers are still aggressively pursuing wet gas plays.
Braziel says recent price weakness is no surprise and "there is nothing magic about natural gas below $2.00/MMBtu. But at the same time, there is everything magic about gas prices this low. We have entered an entirely new world of energy, and natural gas opened the door. It is truly a breakthrough to the other side."
