El Nino weather could extend pricing decline for US natural gas: Shell

By JOE CARROLL
Bloomberg

US natural gas prices that tumbled 45% in the past year are poised to extend those losses if the El Nino weather pattern persists much longer and forestalls frigid weather that normally drives late-year demand, said Royal Dutch Shell’s energy analyst Laird Dyer.

Gas stored in underground chambers and old reservoirs probably will exceed 4 trillion cubic feet in a matter of weeks because mild weather across much of the nation is squelching the need to stoke furnaces, Dyer said on Tuesday during the LDC Gas Forum in Toronto.

Stored supplies climbed to 3.929 trillion cubic feet in the week ended Oct. 30, more than 10% above the same time a year ago, according to the US Energy Department’s data arm. The warm-water phenomenon in the Pacific Ocean known as El Nino probably will prevent a repeat of the so-called Polar Vortex that slammed the US with bone-chilling cold the past two winters, Dyer said.

“If El Nino persists, we could see gas dramatically lower this winter due to lack of demand,” said Dyer, the North American gas fundamentals analyst for Europe’s largest energy company. “Unless we get any kind of winter, we’re looking at a very bearish scenario.”

Price Pressure

Gas futures traded in New York touched a 3.5-year low of $1.948/MMBtu on Oct. 27 amid a multi-year supply glut pouring forth from shale formations from Appalachia to the Rocky Mountains.

Dyer, a former Amoco reservoir engineer and Enron gas marketer, says the tidal wave of US gas production shows no signs of decelerating. Even as explorers began shifting away from gas drilling to search for higher-profit oil in recent years, those shale oil wells also produce lots of gas as a byproduct, he said.

“We have no idea how big these shales are,” Dyer said. “They are too young” in their production lives to be accurately assessed.

• Most Read
• Most Commented