natural gas prices may rebound next year

natural gas prices may rebound next year as producers cut output for the first time in six years amid the stock drive and an expansion of the U.S. economy.

A 20 percent drop in prices this year will contribute to a decline in drilling for the fuel sold to factories, power plants and homeowners, the Energy Department said in its monthly Short-Term Outlook for Energy December 7. Have an average output of 62.01 billion cubic feet per day in 2011, below the record 62.09 billion this year, the department estimated.

Chesapeake Energy Corp., the U.S. producer second largest gas after Exxon Mobil Corp., said last month that drilling will reduce gas and focus on the oil until gas prices rise. The average fuel $ 5 per million British thermal units in 2011, up 13 percent from current prices, according to the median of 15 analyst estimates compiled by us since September.

"The production will flatten in the coming months and possibly begin to decline thereafter, probably in the second half of the year," said Jonathan Wolff, a New York analyst, Credit Suisse Group AG, which is the average prediction price of $ 5.25 in 2011. "I do not look as interesting to drill a gas well at these prices."

Gas for January delivery fell 17.1 cents, or 3.7 percent, to $ 4,435 per million Btu yesterday in the New York Mercantile Exchange.

Factory fuel use

Industrial demand for gas will increase as the economy recovers the U.S. the worst recession since the 1930's. Purchases from manufacturers, steel and chemical plants earn 1.1 percent in 2011 to an estimated 18.09 billion cubic feet per day, according to Energy Department estimates.

A package of tax cuts proposed by President Barack Obama could boost inflation-adjusted growth in U.S. economy at a rate of 4 percent annually in the fourth quarter of 2011, economists at Deutsche Bank Securities said in a client note dated 7 December. Growth in this quarter is estimated at 2.5 percent, according to a survey of economists.

"Industrial demand is getting longer," said Jason Schenker, president of Prestige Economics, an energy consulting company in Austin, Texas. "Withdrawals from storage have been a little larger than historical numbers despite new supplies are coming to market, which means that demand is increasing."

Gas inventories have risen to records for two consecutive years, reaching 3.843 trillion cubic feet in the week ended Nov. 12, according to the Department of Energy. supplies decreased during cold weather months, when demand exceeds production and imports.

Chesapeake plans

Chesapeake, based in Oklahoma City, reduce the portion of gas from its drilling program third in 2012, compared to 90 percent last year, according to executive director Aubrey K. McClendon.

"If gas prices and the recovery of the country says we need more gas, absolutely can answer very quickly," McClendon said in a conference call on November 4. "But now the focus is on oil because it is three or four times more profitable."

Chesapeake anticipated that gas prices could average $ 4.50 in 2011 and $ 5.50 in 2012.

"Production will begin to tail off in the latter part of next year," said Scott Hanold, an energy analyst at RBC Capital Markets in Minneapolis, which provides an average price of $ 2,011 5. "More than half of the works out there are probably not what the economic rate of return."

The production of shale wells increased 71 percent in 2008 to 2,020,000,000,000 cubic feet, representing 17 percent of U.S. supply. Gas production has been increasing since 2005.

Shale gas

The production of the Haynesville shale in Louisiana and eastern Texas, which produces "dry" natural gas or oil-free liquid may fall producers comply with the terms of leases that obliged them to drill within a specified period, said Ray Deacon, an analyst at Pritchard Capital Markets in Warren, Rhode Island, who predicted the gas will average $ 5 next year.

The Department of Energy expects drilling activity to decline in 2011 due to relatively lower natural gas prices, the government said in the December 07 hearing.

Bank of America, Merrill Lynch and Societe Generale SA say prices will keep falling.

Merrill analysts led by Francisco Blanch in New York reduced its forecast $ 4.60 per million BTU to $ 5 in advance, citing a "well saturated" market and higher drilling rates than expected.

"Platforms need to fall by at least 20 to 25 percent over 2011 to significantly slow the pace of new supply and thus support prices," the bank said in a report dated December 3 .

the onshore gas production will create an excess supply in places like the northern Rockies, Louisiana and Pennsylvania, Societe Generale said in a research note Dec. 8. The bank on November 3, 2011 cut its forecast for the price of $ 3.56 per million British thermal units from $ 3.75.

The number of gas rigs U.S. increased from eight to 961 in the week ended on 03 December to 28 percent from a year earlier, Baker Hughes Inc. data show.