Houston Wood Mackenzie, an international energy research and consulting firm opened its North American gas insight service for business and immediately challenged the market view that a record high US natural gas price is sustainable in the second half of the year.
Wood Mackenzie expects second half gas prices set to fall below the current NYMEX strip for the third quarter, a view that runs counter to most domestic market forecasters, currently predicting a bull run for gas through the summer and into the winter peak season. Wood Mackenzie predicts gas consistently pricing higher than residual fuel oil by US$1.25 – US$1.50 / mmbtu, the highest ever summer natural gas premium to oil. This premium will drive significant demand responses from the power market.
Wood Mackenzie’s view that summer gas prices will fall below current expectations is founded on the firms on own proprietary data and analysis of market fundamentals.
“We don’t underestimate the size of the problem, throughout late spring and early summer storage must build back up to an acceptable minimum level. That means injecting an extra 2.5 billion cubic feet per day (bcfd) of natural gas on top of last year’s injection demand, at a time when North American supply is tight at 74 bcfd,” says Wood Mackenzie Head of North American Gas Research, Jen Snyder.
“However downward pressure on price will come in Q3 as a post war oil price stabilises in the mid-to-low US$20 / barrel range and as generators use their flexibility to switch to residual or distillate fuel oil and away from burning natural gas.”
“Our upstream experts also see indigenous North American gas production stabilising in the second half. Our global research also shows LNG import growth will add to the supply mix – although global constraints will keep imports well below regasification capacity,” adds Snyder.
Commenting on the launch of the new Wood Mackenzie service, Head of North American Gas and Power, Mack Brothers said:
“We’ve had an exceptional launch of this new service with up to a hundred customers sampling and shaping the product through its development. The response to our service has been extremely encouraging with the clients receiving basin-by-by supply outlook, detailed analysis of global LNG markets, sectoral demand analysis and information on pricing dynamics.”
“The new service builds on Wood Mackenzie’s unique insight into the North American gas supply situation and leverages the expertise brought by the new team.” says Brothers.
The service provides access to multimedia web-delivered conference calls; weekly commentary; month ahead outlooks on supply, demand and pricing through our Monthly Market Update; Seasonal Market Insight Reports; and direct contact with key specialists in the Wood Mackenzie North American Gas and Power team, in Houston and Boston.
The launch of the North American Gas Insight Service comes just four months after Wood Mackenzie made a series of high profile analyst hires in Houston and Boston and fourteen months after the firms US$40.0m / ï¿½40.5m management and employee buyout from Deutsche Bank AG.