Earlier this week (see Spring, Spring, Spring is in the Air) we looked at the US natural gas supply demand picture. Our analysis focused on the 25 percent run up in NYMEX natural gas futures prices to $4/MMBtu this year (they have since slipped back to close yesterday at $3.90/MMBtu). Prices rose because high winter demand helped demolish a huge gas storage surplus that hung over the market and depressed prices since last spring. The market should not forget however that for a time last year – with prices below $2/MMBtu and Lower 48 dry gas production through the roof - there was talk of hitting the “storage wall”. A sharp increase in power burn soaked up 6 Bcf/d of natural gas last summer and helped the market out of that scrape.
