From the April 01, 2010 issue of Futures Magazine • Subscribe!

Natural gas in a range

A supply glut for natural gas means prices have been heading south for several months. New technologies are creating a whole new pricing and supply structure for natural gas, according to Phil Flynn, senior energy analyst at PFG Best Research.

“For the first time in history, natural gas reserves in this country are going up, not down. Natural gas is not being affected by the global-geopolitical winds. It’s a cheap, abundant, clean fuel that we have at home and the country should be doing backflips over new [technologies],” Flynn says, adding that the market is trying to adjust to what he calls a “new fair price” for natural gas. “We may find natural gas in the $2s sooner than we’ll ever see it above $10 [per mmBtu] again in the near term.” For April and May, he expects natural gas in a range between $3.50 and $4.50, but says that prices could dip down to $2 in the summer if storage is filled to capacity.

Dominick Chirichella, founder of the Energy Management Institute, expects natural gas to continue to stay in a trading range of $4 to $5. “There’s not a lot of push to the upside and there’s [not] really push to the downside. It’s kind of stuck,” he says.

Brad Smith, price risk manager at U.S. Energy Services, says natural gas is having a hard time finding a support level but expects it to level off around $4.60 in the second quarter, before facing more pressure from greater production.

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