Before the weekly inventory update, natural gas prices dropped in the midst of the speculations regarding the stability of the commodity and as Saudi Arabia increased its production.
Prices of natural gas have been strongly supported by the firm demand during spring and summer since more consumers rely on their air conditioners in keeping up with the weather. The commodity rallied for 50 percent at the start of the month, but the trend went south recently.
After the uptrend of natural gas, the commodity declined 2.6 percent to trade $2.658 per million British Thermal Units during the previous sessions. Experts believed the weather condition will likely affect the stockpiles and supplies of natural gas.
Further, the market awaits for the report of the U.S. Energy In formation Administration for the current stockpiles data later today. In relation to this, the analysts forecasted an increase of the supplies of natural gas for almost 38 billion cubic feet. The upsurge of supplies may result into 3.3 trillion cubic feet total storage levels.
Summer And Saudi Arabia
What remains to be a threat to the sustainability of the natural gas futures is the end of summer. Once the season is past, the commodity may face slower demand due to the lesser number of customers using cooling appliances.
Meanwhile, Saudi Arabia bolstered its natural-gas production as the major oil producer cut the dependence on crude oil. Based on the reports brought to the media, the top officials of the country is looking for new ways to produce electricity with the less reliance on crude oil.
Last Wednesday, Amin Nasser, chief executive of Saudí Aramco, confirmed that one of the state-owned energy firm has finally settled the details of the gas project worth $13.33 billion and is set to be completed in 2019. The project will give way for the first ever focus of the country on its gas from the onshore and offshore fields and will add around 20 percent of Saudi’s natural gas production.
If the exploration of Saudi with its gas resources materializes, it may have a total of 17.8 billion standard cubic feet per day in 2020. Further, the energy officials of Saudi still aim to have a capacity of 23 billion standard cubic feet per day in ten years time. Also, the country is already committed to spend $10 billion to discover more gas around Red Sea, huge oil fields and the North shale gas.
On the other hand, Saudi has been dependent with crude for electricity, whereas approximately 600,000 barrels per day was spent and it rallied for 900,000 just last summer. This has been one of the reasons of their tight exploration of the potential of gas, to save crude oil consumption.
Saudi Arabia is still the eighth-largest producer of natural gas in 2015 based on the information provided by the International Energy Agency. Its gas reserves stand at 297.6 trillion standard cubic feet, however, it still gets behind other gas producers such as Russia and the U.S.
In other news, the importance of natural gas for the industrial development has been highlighted by the Tanzania Petroleum Development Corporation (TPDC) as the commodity accounted for 50 percent of electricity. A TPDC board member explained that they have a vast reserve of natural gas to supply all industries in the country to facilitate their operations.
With all the recent exploration into the potential of natural gas, the demand for the commodity will still remain. However, if over supply will happen to natural gas as well that would be another problem in the oil and gas industry. The glut caused by overproduction of the major oil kingpins hasn’t been resolved yet. If it happens to the natural gas, what will happen to the market?