Why natural gas will remain low in 2013

Six weeks ago, natural gas bulls ride high. By Thanksgiving, the price has more than doubled since hitting the decade low of $ 1.90 per million BTU in April. Heading into what should be a winter for the U.S. at least compared to last year, the consensus view that natural gas prices will be higher in 2013, since about half of all U.S. households Heat their homes with natural gas. In late December, the median estimate of 22 analysts surveyed by Bloomberg that natural gas will average $ 3.75 for 2013.A few weeks after the season well, and many of them looked overly optimistic forecasts. Prices fell more than 20 percent since reaching its peak at $ 3.90 per million BTUs in late November. At the National Weather Service forecasts predicts above normal temperatures for the next 10 days in the eastern third of the United States, the pressure is likely to continue. "We see a lot of people and change their forecasts," said Laurent Key, an energy analyst at Societe Generale (SCGLY) in New York. Key expects prices below average around $ 3.16 in the second quarter before climbing. "If we repeated in 2012, is expected to be about a dollar," said Scott Hanold, an energy analyst at RBC Capital Markets (RY) in Minneapolis. That Goldman Sachs (GS) only lower 2013 price target of 50 cents, from $ 4.25 per million BTU to $ 3.75, still well above the current gas price of $ 3.12.Natural is very stable, so prices can rise If the weather turns cold and people crank up their heat, but hard to see that the request to create what has been lost. Although there was a freezing February across the country, the cold snap will not be enough to compensate for a mild December, Goldman analyst Johan Spetz wrote in a research note on Jan. 7 Bloomberg News reported Wednesday that Mike Fitzpatrick, editor of Energy Overview newsletter, think natural gas prices could fall as low as $ 2.20 if the weather remains mild.The more likely scenario would seem something similar to what happened last year, when prices will fall through the spring and will not be passed rise until people start their turn on the AC in May. Part of what helps raise natural gas prices from their lows last April increased demand from utilities to switch from coal to natural gas to generate electricity. But side effects may be more muted in 2013. Then begins destroyed by cheap natural gas in recent years, the coal looks set to recapture some of the market share in 2013. "Coal has become more competitive with natural gas," said Lucas Pipes, an analyst at Brean Murray, Carret & Co. acquired. Coal prices so cheap that if natural gas rose only $ 3.40 this year, Pipes estimates that caused 50 million tonnes of coal demand comes on the market as the utilities to operate their coal plants.The Department of Energy forecasts coal will reach 39 percent of all electricity generated in 2013, up from 37.6 percent last year. Meanwhile, natural gas has been implemented to increase the share of the electricity market may be over. DOE has estimated that natural gas is beating this year and next, down from 30.3 percent of all electricity generated in 2012, to 27.9 percent in 2013, and 27.5 percent above 2014.On the production of natural gas will increase by 0.5 percent this year, according to the DOE. After spending 15 months prior to the reduction in the number of rigs drilling for natural gas, U.S. manufacturers finally started to add to that total in November, perhaps persuaded by the prospect of sustained price of $ 4. While production has slowed in some areas, the Marcellus Shale in western Pennsylvania still attract new investment. "Marcellus is a beast. Still there were 1,000 wells that have not been put online yet, "said Hanold. "This will encourage increased production." Marcellus is more resistant to lower prices. Geology is very good, and the royalty rate is very low, which can make the drill even earn $ 2 price of natural gas, he says.In finally, the main issues that make the price of natural gas is very low for The last few years have too much supply, not enough demand appears here to stay for the foreseeable future. "The price of natural gas is dead for at least two more years," said Fadel Gheit, senior oil and gas analyst at Oppenheimer (either). By dying he means well below $ 4. "The industry has shot itself in the foot with overdrilling," he said. "Now anyone and their brother can get the gas out of the ground and into the system."