Chicago Tribune
Low natural gas prices heating up savings for consumers

Saturday, September 19, 2009

September 19, 2009

Low natural gas prices heating up savings for consumers

With the cool of fall around the corner, Chicago-area consumers should get a warmer feeling about their heating bills: Retail natural gas prices have fallen dramatically over the past year, and barring a particularly ugly winter they are likely to stay low, experts say.

Natural gas prices hit a seven-year low earlier this month, courtesy of a surge in production coupled with slackened demand, the product of a mild summer and the weak economy. And those price cuts are being passed down to consumers.

And to top it all off, there's a supply glut caused by a surge in natural gas production. Analyst Mark Chung of Colorado-based Bentek Energy said the supply surge has been tamping down gas prices more than diminished demand.

"Producers have been pretty aggressive," he said. "We've seen a huge amount of gas flood the market this past year."

The supply glut is partly due to the blossoming of new technologies that allow for more production per well, Chung said.

Natural gas futures have spiked recently, climbing 28 percent this week, the biggest increase in nearly three years. But "that rally is not fundamentally driven," Chung said, saying it's fueled by speculators.

"We don't see the [gas supply glut] going away any time in the short term," Chung said.

Of course, weather, a key driver of fall and winter demand, is a fickle variable. From the perspective of natural gas producers, "That's the one thing that could help the situation: a really cold winter," Chung said.

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