Natural gas reserve numbers under attack

“Mr. Urbina,
This email is in response to your recent inquiry to the Energy Information Administration (EIA) regarding shale gas. My name is Michael Schaal and I am the director of the Office of Petroleum, Natural Gas and Biofuels analysis within EIA's office of Energy Analysis. All of EIA's short term natural gas forecasts (out to 2012) and long term natural gas projections (out to 2035) are developed by EIA analysts and modelers who work in my office. The attachment provides a quick overview of our approach to the shale gas issue, including material that addresses your specific questions. One guiding principle that we employ is, "look at the data." It is clear the data shows that shale gas has become a significant source of domestic natural gas supply. Prior to 2005 shale gas constituted only 4% of natural gas production and had grown to become 23% of production for 2010. EIA's continued monitoring of the situation indicates that growth in shale gas production continues and that shale gas has exceeded 30% of total marketed natural gas production through May of this year. Don't hesitate to contact me if you have any further questions."

The EIA goes on to say that, "The continuing discussion regarding estimates of technically recoverable shale gas resources among Energy Information Administration (EIA) staff at all levels is a part of a healthy analytical process that considers both the shorter term dynamic of the industry and the longer term implications. Ultimately, senior analysts and managers in EIA's Office of Energy Analysis decide how to characterize technically recoverable resources for EIA's annual report."

Oil's big rebound on Greece hopes and the promise of rising interest rates in Europe set the stage for further upside recovery. Yet the upgrading of a tropical disturbance in the Gulf of Mexico added to the run. While Tropical Storm Arlene, the first of the season in the Gulf, is not expected to do much damage, just the thought of the storm was enough to not want to be short.

Later we also received supportive data from the American Petroleum Institute showing a surprise drop of 2.7 million barrels of crude supply and a drop of 91,000 in gas and 945,000 in distillate. EIA and Greece again will be key today.

A great article by Reuters Roberta Rampton telling the story of the EIA oil release. Roberta writes "- It was on May 2, the day U.S. oil prices peaked at nearly $115 a barrel, that President Barrack Obama put into a motion a controversial plan that would lead to the biggest-ever sale of U.S. emergency oil stocks. Even as oil prices fell from that high, a core team of Obama officials pressed ahead with diplomatic efforts to rally other consuming nations behind a plan they felt would aid to the faltering global economy, while ensuring key OPEC allies were consulted, an administration official told Reuters. ‘This was done very carefully and quietly with very significant pros and cons presented,’ the official said, describing the behind-the-scenes talks that led up to the third-ever release of global stockpiles. The picture that emerges is of a lengthy but determined march toward a measure that many analysts say marks a turning point in energy policy favoring more active use of reserves to combat high prices. The United States and other oil-consuming nations agreed on Thursday to release a total of 60 million barrels of oil from reserves -- half of that from the United States -- sending crude prices tumbling." A must Read on Reuters!

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About the Author
Phil Flynn

Senior energy analyst at The PRICE Futures Group and a Fox Business Network contributor. He is one of the world's leading market analysts, providing individual investors, professional traders, and institutions with up-to-the-minute investment and risk management insight into global petroleum, gasoline, and energy markets. His precise and timely forecasts have come to be in great demand by industry and media worldwide and his impressive career goes back almost three decades, gaining attention with his market calls and energetic personality as writer of The Energy Report. You can contact Phil by phone at (888) 264-5665 or by email at pflynn@pricegroup.com. Learn even more on our website at www.pricegroup.com.

 

Futures and options trading involves substantial risk of loss and may not be suitable for everyone. The information presented by The PRICE Futures Group is from sources believed to be reliable and all information reported is subject to change without notice.


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