Gloomy outlook for US natural gas production

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February 2005
Vol. 226 No. 2
North American Gas

Taking the High Road

North American supply and demand are remarkably volatile, yet remain in a constant range despite record drilling. Meanwhile, traders keep gaming and playing the game with gas prices.

Leonard Parent , Contributing Editor, World Oil

Prices are up, drilling is up, well completions are up. These should be good times. But we’ve only just begun. The outlook in 2005 is for wellhead prices to average close to $6.25. Volatility is still with us, and at times even more so. The FERC is working on keeping the players in check, which isn’t easy when you’re talking big bucks.

Forecasts indicate no letup in exploration activity. The expected demand increase did not materialize last year, which is probably just as well, given the price response to indications of tight supply. Don’t expect much increase in demand this year.

A record level of storage this past season is good insurance against shortages later on, even though high withdrawal rates from time to time give speculators room to run and play. New pipeline capacity is needed to move more Rocky Mountain gas to growing markets. Financing issues tend to slow progress on major projects.

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