Dan Lorenz, Joe Knows Energy
This week I attended the DUG East conference in Pittsburgh. Although the focus is on drilling, I found valuable insight that I summarized below:
A well respected industry research firm, Ponderosa seems pretty sure about future prices of oil and gas…
Oil- they see it dropping into the mid 40’s for the balance of this year and then increasing slowly over the next few years. This is driven by the fact that in the short term the factors they are driving up the price are unsustainable, long term they are but only to the $60 level.
Gas- They see the price of gas getting to $4 by the end of the year. This is driven by increasing demand from power plants, LNG exports kicking in, the # of drilled but uncompleted wells( essentially inventory)is greatly reducing and projected hot summer. Longer term they see the price rising to $4.50 by mid next year and then declining as production picks back up to $3.50.Here are comments of several producers:
- At $50 and $3 the rigs will pick up
- It will take 12-18 months for the drilling activity to impact supply significantly
- The price of natural gas will remain higher if the price of crude oil stays in the lower range. It is due to the “associated gas” that is produced from a primarily oil well and is taken out of the market when the oil rigs are not running…keeping the supply of natural gas lower and therefore prices higher.
- LNG exports are key to LNG pricing and there are several factors that will impact this.
- Politics- it is likely that Clinton will win, decision makers will naturally move ahead more quickly once the elections are held.
- Marcellus/ Utica will continue to dominate the market