Bloomberg is reporting that although natural gas prices may have faltered in the first trading day of the year, some analysts are still bullish on the outlook for 2017.
With demand for the fuel surpassing coal for the first time in the US and exports soaring, a years-long glut from shale formations has finally been erased. Now, all that natural gas requires is a good, cold winter.
Traders are watching closely to see how the commodity, which recorded its biggest rally in 11 years after stockpiles fell below their five-year average, holds up against a warm weather forecast running through January 17, typically the coldest time of year.
Gas futures on 3 January plunged by the most in almost three years after forecasts released earlier for a deep freeze across the US suddenly turned milder. Prior to that point, gas prices were expected to average US$3.18 per million British thermal units, a 25% increase over 2016, based on median of 22 analyst estimates compiled by Bloomberg.
In 2016, gas deliveries to Mexico swelled by 31% from January through October year-over-year, to a record 1.1 trillion ft3. This occurred as Mexico deregulated its energy market, making it easier to develop pipeline projects to meet the demand of power companies seeking to switch to a lower cost, less dirty fuel.
In May, low-cost shale gas began heading south via Petroleos Mexicanos’s Los Ramones Phase II pipeline, projected to boost US gas deliveries south of the border by as much as 22%.
Meanwhile, gas cargoes from Cheniere Energy’s Sabine Pass terminal in Louisiana, which became operational in February, have headed to South America, the Middle East and Asia, the world’s biggest LNG market. More than half of US LNG export capacity slated to be online by 2020 has been contracted to Asian buyers as a recent expansion of the Panama Canal cuts travel time to the region.
Domestic US gas use is also on the rise. The nation’s power plants are burning record amounts of the fuel as coal-fired plants shut in response to environmental regulations and competition from cheap gas and renewable energy. New plants that produce fertilizer and methanol, used to make plastics and other chemical products, are also cropping up along the Gulf Coast, sending gas consumption higher.
While warmer winter temperatures will continue to be a major risk to a 2017 gas rally, shale supply also is a concern. Production dropped last year as drillers cut costs after prices tumbled to historic lows in March, but output has started to recover. The number of rigs drilling for gas in the US has jumped more than 60% after sliding in August to the lowest in data going back to 1987.
Read the article online at: https://www.lngindustry.com/liquid-natural-gas/05012017/analysts-bullish-on-gas/