The North American gas market is suffering from oversupply and waning demand that have combined to keep natural gas prices low. Yet, despite this, there are several indications that prices may rally, although there is no consensus on this.

Crude oil prices have been hovering around $70 for some time, and at least one senior analyst, Darin Newsom with DTN, a market information service out of Omaha, Neb., says that oil may hit $90 before year-end.

Newsome added that even though oil has the potential to rise another $20, supply and demand fundamentals remain weak.

The EIA recently reported record-high gas storage. That, combined with robust production mainly from unconventional resource plays, will continue to depress the price of natural gas, the agency said.

In its August short-term energy outlook, the EIA projected a full-year average price of $3.92/MMBtu – a full 30 cents less than its previous forecast.

However, as the economy bounces back and the supply-and-demand dynamic starts to balance, the EIA expects the Henry Hub price to rise to an average of $5.48/Mcf next year.

The EIA said it expects storage inventories to set a record by the end of the injection season, reaching 3.8 tcf by the end of October, topping the record set in 2007 by 235 bcf.

Canada’s National Energy Board attributes current low gas prices to an expanded US natural gas pipeline network, higher LNG imports, and sluggish gas demand. The NEB says the low prices have put pressure on drilling activity since late last year, with Canadian drilling down about 60% and US activity down roughly 50%.

The NEB said it expects gas prices to hold at or below the $4/MMBtu level for the next few weeks at least.

What are your thoughts on natural gas prices and when you think the market will improve?

We have already seen $2.80 MMBTU recently. At least one new LNG receiving terminal is coming online in N America in the next couple months. We could max out on the injection fill this year whioch could trigger shut-ins in some regions. Barring a hurricane that modeartely affects the GOM I believe it is possible that we could see a $2.25-$2.40/MMBTU by the end of September. Even if we see that it should be short lived as the cooler weather kicks in.

Let's hope for an early cold fall!

Sun Aug 30, 05:52:14 PM CDT

Great site!!! Check it out-Google CEO Schmidt says punching down into the earth to capture natural and clean geothermal energy could help move the United States away from it's dependence on petroleum-Dec.16,2008-Betty http://www.geothermalquestions.net

Wed Sep 16, 02:06:34 PM CDT

U.S. politics are going to play a factor in natural gas prices in medium and long term. If current administration weakens and fails to push thru any kind of meaningful cap and trade legislation, the recovery in gas prices will not be robust. However, if legislation passes that makes coal less attractive, we?ll see additional natural gas power generation and associated capital investment. We could see upside beyond current futures trading levels, regardless of the LNG regasification terminals that have come on line.

Wed Sep 23, 08:43:50 AM CDT

I don't know. Niether does the EIA.
By the way, why are taxpayers paying the govt to set up a crystal ball department? oh, I forgot, under the new rules, the govt is running everything.

Wed Sep 23, 10:47:36 AM CDT

Coal prices are generally higher than they were this summer... I hope (but I don't know) that lower natural gas prices lead to more use of gas in electric generation. In a sluggish economy that is going to get worse before it gets better (thanks to the liberals in charge) that appears to me to be our only chance of keeping gas prices out of the toilet.

Tue Mar 02, 07:11:07 AM CST