Why are Natural Gas Prices so low?
To put it simply – a supply glut. Manufacturers ramped up drilling and production in 2008 in response to record energy prices, increasing US gas output by 7.2% for the year. When the economy slowed, we were left with a “hangover” of excess supply that continues to plague the market. Despite the sharply lower price of Natural Gas in 2009, this production trend has continued with gas production up 2.1% for the first two months of 2009. This in contrast to a 4.7% drop in consumption during the same time period. As we projected in our February report, supply overruns have continued to build. As of the latest EIA storage report, nat gas in storage was pegged at 1.695 billion cubic feet (bcf) – near an all-time high for this time of year, 34% above last year at this time and 22.5% above the 5 year average. Why should Natural Gas prices stay low? Because it will take some time to work through the burdensome stockpiles. Despite producers finally beginning to curtail new drilling in the 2nd qua
