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In the United States, huge natural gas stocks are expected to bring fuel prices back to their lowest level in nearly 50 years, IHS Markit reported on Thursday in a new report.
Low prices are expected to materialize despite strong exports and domestic demand, as new oil and gas pipelines connect to ease this constraint. Oil production is expected to increase as a result of the increase in delivery capacity, and natural gas will be produced as a by-product of this additional oil production, said IHS Markit.
According to a Reuters survey of analysts on the future of US natural gas prices next year, IHS Markit's forecasts were the lowest.
"It's just too fast," said Sam Andrus, executive director of IHS Markit, adding that this forecast did not mean that low prices would be sustainable. While lower prices are holding back new investments in exploration and drilling, as demand catches up, prices will rise again and balance again.
The next gas pipeline to be put into service, boosting natural gas production, is Kinder Morgan's $ 1.75 billion Gulf Coast Express, which is expected to go live next month. In total, the capacity of Permian pipelines is expected to increase by 6 billion cubic feet per day by 2022.
Hedge funds have long been calling for the lowering of natural gas prices and many have gambled that prices will fall. In August, hedge funds took their most bearish position in terms of natural gas futures in a decade. However, prices have risen considerably since – 25% – according to the Wall Street Journal, reaching $ 2.58 earlier this week, compared with $ 2.07 the first week of August.
By Julianne Geiger for Oilprice.com
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