[Marklar]

According to this article virtually all natural gas companies have their supplies ready for the Winter and prices are going to fall.

$this->bbcode_second_pass_quote('', '
')Here are some things I know about natural gas. I know from National Gas Intelligence, the news service for industry insiders, that virtually all the local distribution companies already have all their supplies for the winter laid in. So there's no actual shortage. And I know that the Henry Hub, the transmission nexus that's used for delivery of Nymex natural gas futures contracts, was shut down on Sept. 22 and has only begun to come back on line this week. That kind of technical disturbance to a marketplace can cause temporary price distortions as standard delivery arrangements must be renegotiated under stress.

So right now natural gas is more expensive than crude oil per unit of energy. That rarely happens. Crude is almost always more expensive, except for a very small number of very short-lived periods. There's no fundamental reason to think that it will last.

[bobbyald]

We are certainly going to get lots of volatility as we approach the peak. I think demand could certainly be hit hard by the coming recession and with new oil coming on line in 2006/7/8 we could see oil down to $40. This still doesn’t distract from the fact that the trend is up and any supply disturbances will once again cause spikes. Longer term $100+ for certain and probably the “never ending” recession.

Natural Gas I’m not so sure about. A tricky winter for sure but I think we’ll all get through it ok providing we have no more natural or political crisis, however the future looks dire. Gas reserves drop of a cliff once peak has been reached as it has in the US. I’ll watch the next few years with interest.

[joewp]

I found the "report" he's talking about. Since it's a subscription site, here's an archived copy:
$this->bbcode_second_pass_quote('', 'N')GI's Daily Gas Price Index
published : October 4, 2005
Hurricanes Not Expected to Affect Winter LDC Supplies

Local gas distribution companies (LDC) appear to have "lined up or have on hand" most of the natural gas supplies needed for the coming heating season, despite disruptions from Hurricane Katrina, Moody's Investors Service said in a report issued Monday. Hurricane Rita is expected to only have a negligible impact on the physical gas supply to the LDCs.

The report, "Update On the Gas Supply And Liquidity Needs Of Gas LDCs Post Hurricane Katrina" is based on information from a sampling of 12 of the 32 LDCs the ratings credit agency now reviews.

In the report, senior analyst Edward Tan noted that high, volatile gas prices also are helping LDCs to shore up liquidity before seasonal peak borrowings and bad debt expenses that are likely if customers fail to pay higher bills.

"Hurricane Katrina has inflated the price of gas in an already tight demand-supply market," said Tan. "Fortunately, many LDCs were well on their way toward purchasing their gas needs for the upcoming winter prior to the storm's arrival." Gas needed for the winter season is either already in storage or contracted for, Tan said.

Katrina's impact, he said, has been limited to "those LDCs sourcing gas from the Gulf of Mexico, and even they have temporarily turned to alternative gas sources."

However, higher gas prices also will mean higher peak borrowings, possible hedging costs and increases in bad debt for the LDCs. "While companies differ as to their ability to pass along the costs of hedging and expected rises in bad debt expenses, they are engaging customers in an active dialogue regarding alternative methods of paying for their heating bills and reducing the risks of having gas supplies being cut-off on account of non-payment," Tan said.

The need for more credit for supply purchases also appears to have been addressed, Tan noted.

"Credit limits and credit terms are becoming a renewed topic of discussion among trading partners, as the same volumes of gas purchased cost more this winter than in previous heating seasons. The adequacy of credit lines becomes a more relevant factor for assessing the liquidity of various gas companies. Fortunately, for those still in need of added credit lines, the bank market is accommodating and is offering favorable terms to gas utilities."

[OilsNotWell]

I heard about this as well...

The counter to to it was:
$this->bbcode_second_pass_quote('', '
')Gas needed for the winter season is either already in storage or contracted for, Tan said.

[fossilnut2]

$this->bbcode_second_pass_quote('OilsNotWell', '
')Out in the real world however...just because you have a piece of paper that says I have to provide NG supplies won't mean a darn if I don't got it to give...

[aldente]

$this->bbcode_second_pass_quote('Marklar', 'A')ccording to this article virtually all natural gas companies have their supplies ready for the Winter and prices are going to fall.

[jaws]

Just because reserves are filled doesn't mean that prices will collapse. Companies paid very high prices to fill their reserves and they won't sell gas to customers at prices where they lose money.

The benchmark they use to set end-user prices is the replacement cost of their reserves, which is the current market price. If the amount of supply coming into the market is low and high-priced, the supply going out is going to be high-priced as well no matter what the reserves are.

[OilsNotWell]

fossilnut...

You seem to be very optimistic...However, you do realize how close parts of the system were to losing pipeline pressure in 2001/2002? That the US EIA is now considering reclassifying "base" gas [the gas that basically sits in the storage reservoir (depending upon its type) that is needed to maintain proper flow pressure] as 'reserves' although they shouldn't actually be used? Do you realize that many utilities are now very limited in their fuel-switching abilities?

With all due respect, I believe you are fairly uninformed.

The head of a very large chemical company...Dow Chemical) has reported to congress that we have a definite 'crisis' (their words) on hand. You are probably fine up in Alberta, but elsewhere...not so much.

EDIT: Corrected comment regarding report to Congress.

[airstrip1]

It will be interesting to see if this turns out to be the case. Here in the UK consumers have suffered some severe natural gas inflation over the past two years. However, now some of the energy suppliers are allowing their customers to freeze their costs until 2010 by locking into supplies at approximately a 2-3 % premium of the current price. Companies normally only put out these sort of offers when they expect the market price to head south.

[OilsNotWell]

Actually, fossilnut, you may not be 'fine' in Alberta w/NG...

$this->bbcode_second_pass_quote('', 'T')he Parkland Institute, a University of Alberta think-tank, has released a report emphasizing the need for natural gas exports to the USA to be capped and all natural gas liquids be removed from US bound pipelines. This would require withdrawal from NAFTA, something that has gained popularity in Canada with US restrictions on softwood lumber and beef exports.

John Cotter of the Canadian Press reports that 55 % of all Alberta natural gas production is being exported to the USA.

According to the CP story, Alberta Energy spokeswoman Donna McColl appears to be in denial about the state of Alberta's conventional natural gas reserves. She states, ""We are not running out of natural gas. There is a conventional natural gas inventory and we have an abundant supply of this." According to surveys by the US Department of Energy Canada's natural gas reserves will only last for another nine years. Coal-bed methane is expected to take the place of conventional field gas, but it will not be as cheap or readily available. Only a minute fraction of natural gas in Canada is currently produced from coal-bed methane deposits.

The Alberta chemical industry is more supportive of the report since they are hurting from the rise in the price of natural gas, but still don't feel dumping NAFTA is the right solution.

What the article completely ignores is the profligate consumption of natural gas in Alberta's tar sands. Estimates range from 0.5 - 1.35 mcf of natural gas are consumed per barrel of synthetic crude for separation and upgrading. Without a source of natural gas, the tar sands bitumen industry would collapse.

TheWatt

[MagnoliaFan]

$this->bbcode_second_pass_quote('Marklar', 'O')il has fallen quite a bit in the last week or so. It seems to have found a new comfort zone at the $61-$62 range. How about next week? My guess is that we will see it back in the 50's soon, but for how long?

[OilsNotWell]

More for the education of fossilnut:

$this->bbcode_second_pass_quote('', 'F')ERC Staff Voices Concern About US Regional Gas Shortages
10:28 EST Wednesday, Oct 12, 2005

WASHINGTON -(Dow Jones)- Federal Energy Regulatory Commission staffers Wednesday said there could be natural gas supply shortages this winter in certain regions of the U.S., such as the northeast.

"Supply disruption possibilities will be shorter term and more geographically located," said Stephen Harvey, FERC deputy director of Market Oversight and Assessment. "I think it is a concern, the farther you get up into the northeast, the more concern there is."

Staffers also warned at a natural gas conference in Washington that hurricane- related natural gas supply disruptions could also mean higher electricity prices, and possible price spikes this winter, especially for customers in the northeast.

-By Maya Jackson Randall, Dow Jones Newswires; 202-862-9263; maya.jackson- randall@dowjones.com
(END) Dow Jones Newswires
10-12-05 1023ET

[fossilnut2]

$this->bbcode_second_pass_quote('OilsNotWell', 'M')ore for the education of fossilnut:

$this->bbcode_second_pass_quote('', 'F')ERC Staff Voices Concern About US Regional Gas Shortages
10:28 EST Wednesday, Oct 12, 2005

WASHINGTON -(Dow Jones)- Federal Energy Regulatory Commission staffers Wednesday said there could be natural gas supply shortages this winter in certain regions of the U.S., such as the northeast.

"Supply disruption possibilities will be shorter term and more geographically located," said Stephen Harvey, FERC deputy director of Market Oversight and Assessment. "I think it is a concern, the farther you get up into the northeast, the more concern there is."

Staffers also warned at a natural gas conference in Washington that hurricane- related natural gas supply disruptions could also mean higher electricity prices, and possible price spikes this winter, especially for customers in the northeast.

-By Maya Jackson Randall, Dow Jones Newswires; 202-862-9263; maya.jackson- randall@dowjones.com
(END) Dow Jones Newswires
10-12-05 1023ET

[fossilnut2]

Parkland Institute!!!!

That's like quoting Pravda during the cold War.

No wonder your view of the world is so screwed up.

'Peal Oil' like most discussions has it's rational participants but suffers from sprinkling of Mad Max want-to-bes who still have toilet paper left over from their YK2 hoarding.

[OilsNotWell]

$this->bbcode_second_pass_quote('', 'T')ell you what. Need an 'education'. Prove me wrong. Bookmark this thread and next May we'll see how many customers had their natural gas curtailed because of lack of supply...real 'gas' not flowing through the system because of shortages.
Ten to one the answer will be ZERO.

[rogerhb]

$this->bbcode_second_pass_quote('MagnoliaFan', 'T')his is what it has come down to--$61 oil is considered to be _good_ news.

[ubercynicmeister]

Yes, the easy way to tell that the "dreamtime" is over is when they Economic Rationalist / Freemarket fundamentalists go all breathless over a tiny drop in the Price of Oil: "OH, WOWW! The Price of Oil's dropped by .01cents per barrel!!! Oh, there's an OIL Glut!

Must be, since the Price went down...right?"

Indeed, the very evidence that we all need to see straight through the Freemarket arguments IS the very breathlessness of the Freemarketeers when the price of Oil drops slightly....it's called a "slide" in Oil Prices, or a "massive drop" in Oil prices (no, guys...a "masive drop " is when oil gets to $5 per barrel, like it was briefly in 1996~97).

The very language is a dead give-away of the desperation felt. It's less like "the Oil price WILL go back to what we need it to be" (ie: less than $20 per barrel); it's more like "PLEASE Oil Price, we're beggin' ya to go back to $20 per barrel."

[OilsNotWell]

Fossilnut:$this->bbcode_second_pass_quote('', 'T')hat's like quoting Pravda during the cold War.

No wonder your view of the world is so screwed up.

'Peal Oil' like most discussions has it's rational participants but suffers from sprinkling of Mad Max want-to-bes who still have toilet paper left over from their YK2 hoarding.

[donshan]

As price of a commodity goes up less is used- that is if normal economics applies.

Many homeowners have gas heat and will be forced to pay whatever the bill is. Their gas utility needs to supply gas to meet the customer's needs. No gas company wants the headline:

"Local family freezes to death because their gas was cut off!".

Somehow supply will continue and the bills will get paid by someone, even if it is charity.

Many other gas users, especially petrochemical companies, can choose to produce their product or stop using natural gas. ( see the thread in this Economics topic on US nitrogen fertilizers production curtailment )

Natural gas traders were surprised recently that even though a big supply was cut off due to Katrina, the fill rates into natural gas storage reserves continued. The price was higher, but supply continued!.

From Barrons Oct 3, 2005

A partial quote:

"MONDAY, OCTOBER 3, 2005
COMMODITIES CORNER
Gas Prices on a Tear
By SPENCER JAKAB


"BOTH LITERALLY AND FIGURATIVELY, the natural-gas market has been hit by a perfect storm. Freakish spring and summer weather have helped prices double in less than four months.

.........
"I think we're touching the limits in terms of what's sustainable in terms of prices," says Ron Denhardt, vice president for natural gas at Strategic Energy and Economic Research. "At these prices, I think there's going to be a tremendous amount of demand destruction." Anecdotal evidence abounds of industries like petrochemicals, steel and fertilizers citing natural-gas prices as the cause of bottom-line pressures and shuttered factories. According to Denhardt, industrial demand for gas has dropped considerably in the past year.

But the past few weeks seem to have put this demand response into overdrive. While it's hard to separate the effect of hurricane damage to Gulf Coast factories from purely economic considerations, the market has been surprised by how much gas has been left over for storage even as Gulf of Mexico drillers reported a substantial drop in gas production. Some analysts have remarked that it's almost as if there hadn't been a hurricane."

[OilsNotWell]

$this->bbcode_second_pass_quote('', 'B')usinesses using natural gas may see curtailed service

By Stephanie I. Cohen
Last Updated: 10/18/2005 1:24:53 PM
www.investors.com/breakin...7100&brk=1


WASHINGTON (MarketWatch) -- Energy industry officials warned lawmakers on Tuesday that businesses relying on natural gas may see their service interrupted this winter if temperatures plunge and supplies run low.

Larry Downes, chairman of the American Gas Association, told members of the Senate Energy and Natural Resources Committee that industrial and commercial customers that have signed up for "interruptible" service in return for a discount on their supply contracts "may see temporary interruptions."

"Much of the [natural-gas] market is comprised of interruptible contracts that do not guarantee delivery of natural gas," said John Walker, chairman of the Independent Petroleum Association of America, in a letter sent to lawmakers. The trade group represents oil and natural-gas producers.

"Some of this energy can be replaced from alternative energy sources, but much of it will compete for available gas supplies and drive the price accordingly," the group warned.

There are about 5.2 million industrial and commercial natural-gas customers in the United States, representing 51% of total natural-gas domestic consumption.

This cleaner-burning fuel is also used to heat about 110 million homes, representing another 25% of consumption.

Commercial users include restaurants, retail businesses, hotels and office buildings, while industrial users are largely manufacturers. Some of the largest industrial users are chemical companies, steelmakers and paper and pulp manufacturers.

On cold winter days, spiking demand for natural gas can leave local distributors without access to adequate supplies, prompting them to halt service to select users.

"High prices also put our industrial sector at a distinct competitive disadvantage, cause plant closings and idle workers," said Downes, who is also the top executive of New Jersey Resources Corp. (NJR), a natural-gas distributor.

Downes said the industry does not foresee any shortfalls for "firm" customers. Firm customers, like homes and hospitals, are priority customers whose gas supplies cannot be intentionally interrupted.

The natural-gas industry suffered a serious blow when hurricanes Katrina and Rita slammed into the Gulf of Mexico, shutting more than a dozen natural-gas processing plants and damaging a number of natural-gas pipelines.

The U.S. Energy Department predicts it will be some time in the first quarter of 2006 before all the Gulf of Mexico gas wells shut by the hurricanes can be brought back on line, according to Guy Caruso, the administrator of the Energy Information Administration, the statistical arm of the energy agency.

Back in January 2000, the Northeast experienced a severe cold snap. The resulting drop in temperature sent natural-gas demand soaring and supply constraints quickly impeded deliveries. During the peak period, reported gas-service interruptions represented 49% of planned service levels to interruptible customers, according to the Energy Department.