The natural gas markets continue to struggle overall, as the pricing power is still all but gone. The market is still below the $2 level, and we believe that we will continue to see negative pressure. After all, there was little if almost no change in the storage capacity worldwide. The EIA released a statement that states that the capacity of storage simply isn’t even there. The markets will continue to try to reach out and grind higher, but there is always going to be the specter of a massive glut in supply. On top of this, the Americans continue to find more and more natural gas, as fracking has opened up massive amounts of supply.
The EIA stated that no new natural gas storage facilities have been built in the last year, and there are no plans to add to storage at this point. In other words, no matter what happens, the markets are going to have this overhang going forward. There simply is nowhere to put more gas going forward. The seasonality of higher prices for natural gas is all but over, because the northeastern United States is heading into springtime, which of course will bring down the demand for natural gas being used for heat.
With this being the case, we are looking to sell natural gas every chance we get. The market will continue to look soft, and with this it is a ‘sell only’ market going forward. The value of natural gas could be low for the longer-term, and quite frankly neither Adrian or I have a scenario where the market turns into a longer-term uptrend. While some drillers in the US have stepped away from the fields, the reality is that there is a long-term oversupply in the markets.
This reminds us of the 1980s, and the gold markets. The simplicity of that market was that you simply sold gold every time it rallied for years. The natural gas markets will be the same. In fact, there are estimates that the US alone has the ability to drill over 300 years worth of supply, and that supply is only going to be getting larger.