Expect an uptick in natural gas prices, FirstEnergy says
"Astonishing" reduction in Western Canada natural gas production will play a large role in the rebound
It appears supply and demand fundamentals are about to affect natural gas prices.
In a research note today to clients, FirstEnergy Capital says that based on natural gas pipeline receipt data, supplies for the cleanest burning fossil fuel averaged 13.13 billion cubic feet per day (bcf) in July in Western Canada.
That’s a lot of gas production, but it’s also 1.45 bcf less than Western Canada produced in July 2011, a reduction FirstEnergy calls “astonishing.”
The results aren’t terribly surprising, as weak natural gas prices in most North American markets has companies producing less of the stuff and drilling less than they have in the past.
The Calgary-based investment bank doesn’t see that trend ending in the near future. “We do not expect any material increase in natural gas drilling in 2013, with the same number of wells being tied in during 2013 as we expect in 2012.”
As for the United States, where the “shale gale” created the oversupply situation that gutted natural gas prices in the first place, FirstEnergy is seeing supplies flattening out and possibly headed for modest declines in the months ahead.
And when you get flat or declining supplies mixed in with growing demand, what do you get? Higher prices. At least that’s FirstEnergy’s take.
With demand growth next year (assuming a normal winter) and the elimination and emergence of a storage deficit, we are becoming increasingly bullish on 2013 and 2014 price prospects even beyond our current above consensus forecast.
Calgary’s suffering natural gas producers hope that FirstEnergy is on the mark with this forecast.
The federal government has dropped the hammer on the panel that is reviewing Enbridge Inc.’s controversial Northern Gateway pipeline. The review must be complete by December 2013.
While this announcement won’t please the environmental set, the deadline seem reasonable.
But the federal government has also formalized the process under which the panel can’t reject the application on environmental grounds. That figures to play out worse than the imposed deadline.