WoodMac: No gas price rebound seen in near term

HOUSTON — Weakness in global natural gas markets will delay a recovery in US gas prices and rig counts. Exacerbating the weakness in gas demand has been a marked downturn in demand for electric power by both industrial and residential customers, analysts with the research and consulting firm Wood Mackenzie told reporters today.

The economic recession has had a big impact on US natural gas, electric power, and coal markets. The contractions in the economy during fourth quarter 2008 and first quarter 2009 led to a contraction in power demand at a time when gas supply was increasing from successful development of shale gas and from an increase in LNG imports.

Speaking on power markets, George Given, WoodMac’s head of global power research, said he expects the global economic recession will last several more quarters.

Industrial electric power loads were down sharply in the first quarter, Given said, and residential demand for power has declined more sharply than expected based on the extent of the contraction in gross domestic product. Given said the current downturn increases the likelihood that electric power plants will be mothballed and retired to balance supply and demand.

Although gas rigs have been laid down drastically since September 2008 in response to a gas supply overload and the resulting crash in prices, an upswing is not in the offing next year, according to Jen Snyder, principal analyst for North America gas and power research at WoodMac.

Oil and Gas Journal