To everyone with Natural Gas Heavy Energy Trusts (North America only) -
It looks like winter has been warm enough that it will end with about 1600 Bcf in storage. Unless the summer is real hot, meaning in about the top 30% of hot summers, gas storage will be close to filled by early September, there won't be a place to put all the gas, and the price could drop like a rock over the summer....maybe under $5.00.
Also, line pressures would be allowed to go up to reduce the volumes into the pipelines - this means slightly lower (maybe 5%) unit volumes. Compressors will also be adjusted to match supply to demand.
This means greatly reduced revenue for income trusts, both from lower price and lower volume.
You may wish to consider avoiding this.
>>>Note that oil intensive trusts may go the other way because of Iran, Nigeria, Venezuela, and demand from China, India etc.
The good news is there may be some really great bargains in Natural Gas trusts in late 2006 to early 2007.
As the price drops, NG driling will slow down (switching to oil) and depletion will start to bring down production to match demand, so the situation will correct in about 18-24 months.
But for right now, it looks like a warm winter will kill the natural gas price.
Best regards, energyplay |
