Natural Gas Price Falls Below $3
Breaking through another psychological barrier, US natural gas prices fell to $2.99/thousand cubic feet in futures trading this morning. That’s the lowest price in more than two years and light years away from highs of around $14/thousand cubic feet in…
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Breaking through another psychological barrier, US natural gas prices fell to $2.99/thousand cubic feet in futures trading this morning. That’s the lowest price in more than two years and light years away from highs of around $14/thousand cubic feet in 2005 and nearly $12/thousand cubic feet in 2008.
The explosion in shale gas production is the reason for the decline, and it now appears that drillers are cutting back, with rig counts down -12% in 2011. But there are still more than 800 rigs going after natural gas and until that number drops even further, prices will remain low.
Working against a drop in the rig count are lease terms that require producers to develop the lease quickly or lose the rights. Producers are caught between the rock of low prices and the hard place of having to drill to maintain their right to the gas. Look for prices to remain low throughout next year.
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Paul Ausick has been writing for 247Wallst.com for more than a decade. He has written extensively on investing in the energy, defense, and technology sectors. In a previous life, he wrote technical documentation and managed a marketing communications group in Silicon Valley.
He has a bachelor's degree in English from the University of Chicago and now lives in Montana, where he fishes for trout in the summer and stays inside during the winter.