According to a survey released this week, oil and natural gas
executives and investors think the price of natural gas will
remain below $2.50 per 1,000 cubic feet (mcf) for the rest of the
year -- a level that is too low for the industry's growth.
Eighty-six percent of the 768 respondents, the majority
industry executives, believe natural gas prices will average
under $2.50, while 61 percent think they will drop below $2 this
The outlook for 2013 is not much better: 65 percent of poll
respondents believe natural gas prices will stay below $3 per mcf
More than 70 percent of the those responding to the survey
said growth in natural gas development needs a market price of
$3.50 or higher in order to be sustainable.
The poll was conducted by Tudor, Pickering, Holt & Co., an
energy investment and merchant banking house.
On Wednesday, natural gas on the New York Mercantile Exchange
traded at $2.21 per mcf, four cents higher than the previous
Natural gas prices have been plummeting thanks to production
that is outpacing demand. Technological advancements in natural
gas drilling -- namely hydraulic fracturing, or fracking --
allows for the horizontal drilling in unconventional shale
deposits, and has opened vast tracts of recoverable natural gas
throughout the country.
Regions like Pennsylvania, Ohio, Colorado and Texas are
experiencing an energy boom, and the nation's storage capacity
for natural gas is almost exhausted.
The Marcellus Shale formation, which straddles Pennsylvania,
Ohio and parts of Virginia, alone contains 84 trillion cubic feet
of natural gas.
For the time being, large oil and natural gas companies like
Exxon Mobil (
) and ConocoPhillips (
) are weathering low spot prices for natural gas thanks to high
crude prices -- even if they are scaling back their production of
natural gas -- but for mid- to low-level natural gas producers,
the prices are harder to bear.
"At this point even a major hurricane or a very hot summer are
not likely to get this market turned around, as the supply [and]
demand balance is so loose that a major supply response is the
only likely catalyst to spawn a price rally, and that would be a
difficult feat given current production and projections," said a
market report by Snyder Brothers Inc, an independent oil and
natural gas company based in Pennsylvania. "The outlook remains
bleak until something changes."
The same survey showed respondents think the spot price for
crude oil will remain high, averaging between $90 and $110 a
barrel through 2013, which could prove problematic for the Obama
administration as it struggles to rein in high energy costs
including gasoline ahead of the November election.
Crude oil in New York on Wednesday traded at $103.32 a