Que, in the '00/'01 boom the monthly average Henry Hub price of natty exceeded $5 for 7 straight months (Oct. '00 to April '01). The Nymex HH price has averaged over $5 for 6 straight months at this point, and July looks like a lock to exceed $5. I guess August is gonna depend on the weather.
On the issue of taking away demand, I believe the key is, what is the average price expected to be going forward, not necessarily whether the high prices are "permanent". Until '00, the average price of natty HH never exceeded (in nominal $$) $2.73/mcf (which was in '96). Then in '00, '01, and '02 it averaged $4.13, $4.10, and $3.32 respectively, and we seem destined to average over $5 this year.
So for a four year block of time, natty will have averaged well over $4/mcf. This is what the fertilizer plants are looking at when they decide to get the heck outta the US. This is also what has prompted the high interest in LNG again, causing a massive company such as Dow Chemical to deign to contract with this tiny company called Cheniere Energy regarding future gas supply. |
