As many of you are aware or have experienced, natural gas prices have literally bottomed from the all time highs that occurred back in 2009. The futures strip is trading at 10 year lows and there are a number of companies that are taking advantage of the pricing opportunities by locking up natural gas pricing for a number of years going forward.
According to recent market analysis as shared by the Department of Revenue, locking natural gas prices now is a good move which positions companies to establish a fixed price for a number of months going forward. There are a number of analysts who believe that locking natural gas futures now could jeopardize risks of catching additional savings opportunities as a result of the Marcellus Shale initiatives. Some analysts believe that there is still additional “bottom” to the natural gas futures pricing and that companies should stay on a month-to-month pricing model going forward. Other analysts feel differently.
Bruce Scroxton, president of Tru Gas Inc., says that the Marcellus Shale impact will actually drive prices higher in the long term months. “We believe that short term the Marcellus Shale impact will keep prices low but drillers and suppliers aren’t going to tolerate that position for a long period of time,” Scroxton said. “They will begin to shut wells and production down thus causing the ‘supply and demand’ impact to take effect and drive prices to a higher level in the 1st quarter of 2013.”
Natural gas companies and supporters aren’t ignorant to what is taking place and will do what is necessary to ensure that prices move northward in the coming months. Contrary to what Bullish analysts believe, bearish analysts believe that gas prices will remain low and continue to move lower as the shale drilling initiatives take place.
“The supply that is being generated as a result of the initiatives set forth in the Marcellus Shale project can only continue to keep prices low and drive them lower during 3rd and 4th quarter 2012,” cites Jeff Poborsky of JRyan Consulting. The market has nowhere to move but to run lower due to excess supply and continuing drilling efforts in the region.”
As with the stock market, depending on how “bullish” or “bearish” you are, taking proper position and executing proper buys depending on your companies risk tolerance is critical given what the market is offering at this time. Conservative buyers should lock pricing now and do it for a two or three year period to establish budget certainty. Risk takers should take a “hold” position and float the market until market indicators show otherwise. In either instance, it is a “great day to make a move.”