Oil traders watch stimulus decisions as WTI decouples from Brent

Natural gas pipelines in the works

Natural gas traders may be taking the pipe with all the new pipelines coming on board. The Shale Reporter says that the Federal Energy Regulatory Commission lists several other Pennsylvania pipeline projects approved in 2012. By the end of the year, Spectra Energy anticipates completion of the Philadelphia Lateral Project through Delaware County. That line has the potential to move more than 20 Mcf (thousand cubic feet) of natural gas a day through the Northeast. The Kinder Morgan Energy Partners Tennessee 300 Line Expansion Project and Upgrade, scheduled for completion in November 2013, will add 40 miles of pipe between Pennsylvania and New Jersey, with the capacity to transport 636,000 dekatherms of natural gas a day. The Nation Fuel Gas Supply Corporation Line N Expansion Project will add five miles of pipe through Washington County, with an anticipated completion of November 2012.

The Shale Reporter goes on, “The boom of hydraulic fracturing in the Northeast has created a glut of natural gas that market analysts anticipate will worsen because of new pipeline projects and another mild winter. Natural gas prices could hit a low of $2 per million Btu, according to leading energy analyst Phil Flynn of the Chicago-based Price Futures Group. Flynn anticipates increased deliveries from new pipelines that could help link up about 1,000 uncompleted Marcellus shale wells and bring them online. Last week, the natural gas price remained steady at $3.21 per million British thermal units, and the Energy Information Agency was reporting an 8 percent increase in natural gas storage from a year ago. Flynn said Thursday that he would stand by his $2 prediction, “assuming we don’t get a colder-than-normal winter.” He pointed out that the National Oceanic and Atmospheric Administration had just released its three-month weather report that predicts above-normal temperatures for the Midwest and Northeast from December through February. “Based on what we see with supplies being 8% above the average and at a record high, we should see (gas) prices come back down,” Flynn said. The biggest contributing factors, he said, are new pipelines and the non-producing wells these pipelines will make accessible for natural gas extraction.

According to the EIA, “there are over 1,000 natural gas wells that have been drilled in northern Pennsylvania but which are not yet producing natural gas because there is not enough interstate and gathering pipeline infrastructure to accommodate the new production.” New pipelines, such as Inergy Midstream’s Marc 1 pipeline project that runs 39 miles through Pennsylvania’s Bradford, Sullivan and Lycoming counties, are set for completion by year’s end.

In an email, Inergy responded to Flynn’s prediction: “New pipelines like Inergy’s MARC I will benefit Marcellus producers by helping them move their gas to demand markets. By providing greater market access, new pipeline infrastructure can offer Marcellus producers alternatives to curtailing production when natural gas prices are low.” Even if the pipelines allow many of the currently non-producing Marcellus shale wells to be tapped, there is no certainty on the production or rate of decline for each well, which can vary considerably.”

“In the end,” Inergy wrote,”the market determines how much Marcellus shale gas is produced, not the pipelines that link supply regions and demand centers.” Predicting the future of natural gas prices, although much like predicting the weather, is not nearly as easy as looking out the window.

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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