US gas futures prices to fall 80 cents to $1/MMBtu this year: Bentek

Wednesday, May 11, 2011

Natural gas futures contract prices could fall between 80 cents/MMBtu and $1/MMBtu by the end of the year, but that should be good news for the industry, Bentek Energy vice president Jim Simpson said Tuesday.

"Through the end of 2015 we see supply growing by 5.4 Bcf/d, but it will only grow if someone can burn those molecules," Simpson said, speaking at the GasMart conference in Chicago.

Bentek is a unit of Platts, a division of The McGraw-Hill companies.

While current production levels are sustainable at the $4/MMBtu to $5/MMBtu range because so many producers are slashing costs by focusing on liquids and oil, long-term demand growth isn't as likely if gas prices move into the $5.50/MMBtu to $6/MMBtu range, Simpson said.

Simpson said Bentek is beginning to see signs of increased fuel oil-to-gas switching in the Northeast despite additional infrastructure costs involved as oil prices remain high.
"Utilities can pass the infrastructure costs on to the consumer, add it to the natural gas costs, and the consumer's bill is still cheaper than if they went with fuel oil," Simpson said.

Bentek's predictions call for a 2.2-Bcf/d increase in gas demand by the end of 2011 because of fuel switching, Simpson said, matching projections for 2.3 Bcf/d in supply over the same period, largely from shale production and associated gas from increased oil and liquids production.

Simpson termed the heavy amount of fuel switching a structural shift in demand, leading to Bentek's projections for fuel switching to account for an 8.5 Bcf/d growth in gas demand through 2020.

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