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Gold/Mining/Energy : Big Dog's Boom Boom Room
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To: JimisJim who wrote (173675)10/27/2012 3:03:34 PM
From: Ed Ajootian  Read Replies (1) of 206202
 
JimisJim, good point about the fuel switching but the switching that is having the most current impact is between natty and coal. Natty demand for transportation fuels is < 1% of total now so even if that doubles it would hardly move the needle.

The big thing that's happened in recent months is that we have chewed enough of the storage overhang away that we don't need to have prices low enough to induce the PRB basin coal to get displaced by natty any more. As long as that situation remains the case its unlikely we would see natty prices much below $3 for very long, since I believe that's the magic price at which PRB coal becomes more expensive than natty.

Regarding supply, I believe the production has been "artificially" buttressed by previously curtailed gas coming back, new pipelines coming in, etc. I believe the last big impact from this will occur next month when 2 BCFD of currently shut-in gas at the Marcellus will come online. So we will probably see November as being the peak month for natty production for this production boom. After that I'm expecting to see a gradual decline in production start to kick in. Ex-Marcellus the Lower-48 production has already started to decline.

Of course winter brings weather issues to the fore, but with production on the decline or at worst, level, vs. production ramping up as it was last winter, I believe we are in a much better position going into this winter than we were last year.
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