BENTEK

NYMEX natural gas prices have fallen 16 percent since reaching their high for the year so far of $4.408/MMBtu on April 19, 2013. The NYMEX August contract closed at $3.582/MMBtu on June 27, 2013.The market is currently in the low demand shoulder season. Winter is over and summer heat is on the way but temperatures in May and June are not typically high enough to significantly increase demand for air conditioning.  Today we review shoulder season gas market fundamentals.

The Bentek Eagle Ford crude oil production outlook back in 2011 pointed to a four fold increase in production to 900 Mb/d over the five years to 2016. That number was actually achieved in under two years and today’s forecast calls for 1.5 MMb/d production by 2016. Those growth rates are remarkable enough but the super light nature of the crude being produced means much of it is better classified as condensate. The challenge for producers and refiners in Texas going forward is to find adequate markets for increasing volumes of condensate. Today we continue a series reflecting on the speed of change that shale production is dictating.

<p>The natural gas supply demand story has been dominated all year by the record storage overhang from 2011 and whether 2012 gas storage injections could continue until October or November without hitting the wall - i.e. completely filling storage capacity.</p>

Oil production from the North Dakota Bakken shale reached 639 Mb/d in May 2012. Associated natural gas production was 651 MMcf/d. So far oil production has been the main focus for Bakken producers. Gas production has been an afterthought. So much so that 1/3rd of it is flared.  A new BENTEK study for North Dakota energy policymakers (we provide a link to the study) indicates natural gas volumes in the region will increase substantially in the coming years. The obvious market for this gas is to displace Canadian gas flowing through the Bakken to get to the Midwest. Today we look at the coming battle for pipeline capacity between producers in the Bakken and those in Canada.