Natural Gas Exploration Falls

Investing.com reported on March 3 that, as a result of the natural gas glut, the count of rigs searching for new gas supplies now stands at the lowest level since 1993. The count has fallen 63 percent from its 2012 peak and 81 percent from its all-time peak in 2008.

According to an article on Zacks.com on March 9, storage levels are about 40 percent above last year’s levels, though still 8 percent below their 5-year average. This has helped the Henry Hub price to remain at about $2.8 per MMBtu, down about 80 percent from a peak of $13.50 in 2008.

Retail Energy Implications

It is possible that prices will fall further. However, given how far they have already fallen in most markets and the fact that producers are curtailing production, prices may not fall much further. Gas use will probably continue to rise as gas replaces coal for power generation. If exploration falls for long enough, eventually prices are likely to rise. Buyers who believe that natural gas prices in their area will not fall much further and may ultimately increase can benefit from signing long-term gas contracts to lock in low prices for the next several years and protect against any potential future price increases.

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