Coldest weather of record and winter hasn't even started, however, Nat Gas prices are plummeting and soon to fall below $4.  Hate to think what prices would be if it was a mild winter.

So who benefits from ultra-low gas prices - surely not the operators spending $8 - 10 million drilling wells that require 4- 5 BCF to break even.  Good luck with that business model!  Mineral owners make out ok, but in the long run - a very valuable product is being given away.

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Not all operators spend $8 - $10 million on a well.  Many spend about half that in plays other than the Haynesville.  And many of those wells are either oil or wet gas or some combination of the two that also produce natural gas.  Therefore their economics are not based on the price of natural gas.  Unfortunately for dry gas competitors like the Haynesville Shale, operators in those other plays can send gas to the Gulf Coast and sell it for less than the cost to produce an mcf in the Haynesville even after incurring transportation costs.  Natural gas produced from those "wet" wells is termed "associated gas".  As more regulatory agencies prohibit or discourage flaring of associated natural gas and as more pipelines provide the opportunity to send that gas to the most favorable market the more likely that natural gas in the Gulf Coast Region will remain low even in a period of increasing demand.

Seasonal cold snaps effect the price of gas produced in the NE more than in the South.  Such short term extra demand periods don't move the needle much for the longer term price range of natural gas.  Last February (the Polar Vortex) is a good example.

Sorry - my reference of $8-10 million wells was for Haynesville Shale.  With below freezing temps forecasted for 50 states throughout the country -  Nat. Gas prices closed at $3.98.  I imagine there will not be many profitable wells with prices declining in arctic-like conditions.

TMS is worse off - $18-19 million wells with oil falling equally as fast ($74.21).  Let's see how long those operators last under those conditions.

 

Most natural gas is sold on the monthly contract price, not on the spot price.  The month is young.  Wait until later in the month when end users who run out have to buy on the spot market.  If cold temps remain or more are in the forecast you'll likely see a spike in the price.

Skip,

I agree. This price is very temporary. If the cold weather continues nation wide I would expect the price to be in the $6 range in January. There is always a lag between demand and price. The price will change quickly when the market factors in the demand and storage shortfall that exist.

One possible scenario is that a colder than predicted winter is the only factor, including "freeze offs", that could cut off injection and decrease gas in storage.  The other side of that equation is that a warmer than forecast winter slows but does not stop injection and storage reaches 100% capacity.  I've read several recent articles laying out this possibility. 

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