March 31st, 2012 
Category: 
Peter Tertzakian, chief energy economist at Calgary’s ARC Financial Corp., reported that coinciding with the collapse of natural gas prices, power generators have been using an average of 6.0 bcf/d more than normal over the past 6 weeks. The mild winter which resulted in bloated level of inventories masked increased consumption by power generators.
While natural gas storage levels are 900 bcf more than the 5 year average for this time of year, Peter believes that with gas production unlikely to grow this year, the extra 6 bcf/d of power demand COULD, if sustained, wipe out excess stores in less than 5 months.
Is the time to be a contrarian investor getting close? What do you think?
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Blog Roundup
Two Years of Blogging: My Thoughts, and an iPad 3 (The “New Ipad”) Giveaway + Other Great Prizes! (Invest it Wisely)
Invest it Wisely also launched his pro version of Easy Voice Recorder for Android phones.
The Worried Boomer book review and free copy giveaway (My Own Advisor)
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Enjoy Your Weekend!
I really would like to see NG prices get out of the gutter soon, as it would be a boone to many producers.
I agree with you, add to that a boone to investors as NG weighted companies would recover and get on the track of returning capital gains and dividend.
I don’t know; I would assume that the higher demand is already priced in. A reduction of inventories just means that the market is clearing via higher demand. Without further changes I don’t see a reason for prices to rise, unfortunately.
You could be right and one way to know is during this summer where either there will be blood on the street or NG prices stabilize following a surprising drop in inventories.
Hi Mich:
This is an interesting observation. The response by the electrical utilities is a natural though the question is how much of the market do they represent. There is nothing like a discounted price to get a product used in the market. I am not going to sell my ONR yet.
Regards,
J
John, spot on, lower prices attract demand but in the case of NG we need major ramp up in consumption. I don’t see the light at the end of the tunnel yet but we need to keep a close eye on NG as the point of maximum pessimism might be close.
ONR should have been sold when they announced their waskahigan oil well results. Too late now but on the other hand ONR is a survivor in the long run.
I agree with IIW. I would think will have already been accounted for. We will see what happens though.
You guys could be right, let’s wait and see.
Thanks for the mention Mich!
The markets are pretty efficient and everything is what it is in terms of price. Short-term, NG will likely stay low if I was a betting man. Long-term, I think we might look back at this time and see what a steal NG or NG companies are right now.
Agree, if one can call the bottom for NG, he will be very happy in 2 years once exports begin.
[...] generation save the day? It will depend on the sustainability of the extra 6 BCF/d in demand that appeared earlier this [...]