Natural gas sector banking on cold winter, economic surge to boost prices

Analysts who track natural gas prices and supplies say the industry is banking on a cold winter and an economic recovery to bolster a commodity that has taken a beating on stock exchanges in recent days.

Natural gas price plummeted 8 percent Thursday to $4.466 per 1,000 cubic feet, according to the Associated Press, while the Energy Information Administration simultaneously reported underground storage of natural gas in the lower 48 states topped 3.589 trillion cubic feet, surpassing the previous all-time high of 3.545 trillion cubic feet set in November of 2007.

An unusually cool summer nationwide and the ongoing economic downturn, which has lowered industrial demand, combined to drop prices and increase stored supplies to near capacity, meaning more gas could be dumped on the open market, some analysts told AP. Colorado is one of the top gas-producing states in the Rocky Mountain West and could see even more of a production downturn if that happens.

But Peter Beutel, an analyst at Cameron Hanover, had a more optimistic take, according to AP: “We’ll start drawing down those supplies, especially if it’s cold and the economy starts to pick back up.”

Things will get worse before they get better for the industry if those two things don’t happen.

“You need a (cold) winter like we haven’t seen in a long time, and you probably need the economy to kick in a bit too in order to pull all this gas out (of storage),” Tom Saal, senior vice president at Hencorp Futures in Miami, told AP. “If we don’t get a very cold winter as advertised, prices will plunge.”

More strict environmental regulation of the natural gas industry in Colorado is being blamed by some Republicans for the downturn on the state’s Western Slope.

A prolonged plunge in prices could bolster their argument that Democrats from the State Legislature to the governor’s mansion to the county commissioner level have conspired to kill high-paying energy sector jobs

Conversely, it could also lend credence to the argument by some Democrats and environmentalist that natural gas is a boom-or-bust commodity that is hard to rely on for long-term economic stability.

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