CALGARY - Natural gas prices could plunge to $2 per gigajoule by the fall as volumes get backed up into Alberta on rising U.S. production and stable demand, say analysts.
The sombre expectation would lead to companies shutting in volumes rather than producing at a loss as incremental supply from the United States pushes Canadian volumes back into Alberta.
Natural gas exports to the U.S. fell to an 11-year low in 2010, along with the lowest average price - $4.29 per gigajoule - seen in a decade, according to National Energy Board data.
Exports during January and February of this year dropped to around seven billion cubic feet per day, and the trend is expected to continue into the future as new pipelines in the U.S. Rockies and east coast open basins to high demand markets, said Rick Margolin, analyst with Denver, CO-based Bentek Energy.
"All of those factors are sort of colluding to deny Canadian gas shares of the American market," Margolin said. "Unfortunately, we don't see that slowing down."
Significant production declines in the U.S. and new demand sources coming on board will be needed to reverse the slide, he said.
"We see hints and glimmers of that right now, but nothing to an appreciable extent that is going to forestall this decline in exports to the U.S. anytime soon," Margolin said.
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