Oil markets proving a study in supply and demand

Waiting for Ben Again

Natural gas rebounds as the markets focus on the heat in New York and a soaring cash market. Dow Jones reported that Natural gas for delivery at Transcontinental Zone 6 traded at $3.8614/MMBtu on Friday but is at $5.2137 today as the region has begun a run of afternoon temperatures in the 90s, a scenario forecasters expect to persist all week. On top of that as Reuters reported last week the owner of the Transcontinental Gas Pipeline Co LLC received approval on Friday from federal energy regulators to startup a segment of a natural gas pipeline expansion project this weekend. Williams Cos Inc. had requested approval to start the new segment so it can reroute supply to customers while performing some work on another segment.  The company had said in a June 28 filing that if it was unable to place the pipeline section into service by the weekend "existing delivery obligations could be negatively impacted." On Thursday, a company spokesman said it would not take its line out of service this weekend unless it received approval from the U.S. Federal Energy Regulatory Commission to operate the new segment. The work is related to the Northeast Supply Link project, an extension of the Transco line designed to transport around 250 million cubic feet per day of gas to markets in Pennsylvania, New York and New Jersey.  The full 10,200-mile Transco pipeline has a capacity to deliver some 9.8 billion cubic feet per day of natural gas from the Gulf Coast to the Northeast.

The Wall Street Journal in a must read  writes “More than $160 billion of bets placed by international oil companies including Chevron Corp. and Exxon Mobil Corp. on natural gas in Australia are getting riskier, as the country becomes the latest major energy producer to grapple with North America's surging output of shale gas. Once a global hot spot for energy investment due to its political stability and large, untapped natural-gas reserves, Australia's appeal has waned as labor shortages and a high Australian dollar have triggered cost blowouts at flagship projects. Although those problems have been around for a while, they are becoming more worrisome now that gas prices elsewhere have dropped and buyers have more options for securing energy supply. "The industry has more than US$160 billion of liquefied natural gas investments currently in flight [being built]. But upward of another US$100 billion in potential future projects could be at risk," Chevron Australia Managing Director Roy Krzywosinski said.

Australia has long harbored ambitions of becoming the major liquefied-natural-gas, or LNG, supply hub for Asia and has over a dozen projects either under construction or on the drawing board. The seven terminals currently being built should allow Australia to leapfrog Qatar as the world's biggest LNG exporter by 2018.  However, further supply additions may prove harder to achieve. Costs are rising sharply and first cargoes are being delayed at existing projects, hurting returns on investment. These problems are making companies wary of expanding or building new projects in Australia.”

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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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