Gas Price Outlook For 2016

I was actually surprised that this article didn’t say anything about the need for gas to replace electricity generation as many coal plants go offline. Also, with the potential for a new president approving the Keystone pipeline, that would certainly have some bearing on the gas price outlook.

gas being used for heat

Will LNG exports and globalization impact U.S. natural gas price forecast?

The answer to the above question is yes, so let’s look at exactly how that will happen.

The Evolving LNG Market

There’s been a dramatic increase in LNG exports between 2004 to 2014. The increase has led to a much more bearish outlook for gas compared to that of oil so it’s a buyer’s market. Australia should become the largest LNG producer in the years to come while the U.S. should become the 3rd largest.

The Impact on U.S. Natural Gas Prices

According to Francisco Blanch, head of commodities research at Bank of America Corp, “Connecting U.S. natural gas prices, could result in wider spreads at home.” He goes on to say that the “futures for January 2017 are already trading at a 35.7 cent premium to that of January 2017 futures, which is the biggest spread since 2012.”

In May of 2012 the New York Mercantile Exchange (NYMEX) settlement rate is that of where prices are trading currently, and by the end of 2012 the NYMEX settlement rate closed in the $3.35 range. Decreased production and a hot summer were the key influences why prices rebounded late in 2012.

Will the rest of 2016 be a carbon copy of 2012?

Personally, I think natural gas prices will go up in 2016. The biggest drivers in price will be the U.S.’s LNG exports finally moving forward and an expected hotter summer this year. [4] We should focus on how much LNG exports impact our prices at home, and we all know that higher demand increases prices. Thus the question for the natural gas price forecast becomes, just how much will prices go up?

Read the entire article at: http://blogs.inciteenergy.com/inciteblog/what-wikipedia-cant-tell-you-about-the-natural-gas-price-forecast

Sources:

The Economist-Natural Gas “Step on it” January 30, 2016 from the print edition,

http://www.economist.com/node/21689644/print

Bloomberg “Gas Prices Will Be Affected by LNG Exports” July 30, 2015

U.S. Energy Information Administration, http://www.eia.gov/

NOAA, Climate Forecasts- Jul-Aug-Sep 2016 http://www.cpc.ncep.noaa.gov/products/predictions/long_range/seasonal.php?lead=6

I think that trying to determine the gas price outlook from the information provided and otherwise available is a very mixed message.

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About Larry

After three decades in corporate America, I decided that I wanted to work for myself. Exploring many alternatives led to the opportunity presented from energy deregulation. Being my own boss has many advantages which I enjoy. Building a residual income stream in addition to present income from giving away a free service to businesses that saves them money; I can only say that I wish I discovered this sooner.
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