I guess I'm "aging myself" a little with this post -- I suspect that many readers were not yet old enough to get a drivers license in '99. But a little bit of history may be helpful to put current events in context.
As shown by this chart of the annual average natty prices since 1930, oilnergy.com , prior to '00 natty never averaged even $3/mcf and more recently had been mired right around the $2 mark for years. Then we had a brutally cold winter in '99 -- '00, and it exposed the fragility of the natty supply/demand balance for the first time ever. Natty prices spiked up to previously inconceivable levels in early '00, something like $10 if memory serves, before settling back down, but basically never looked back to historical levels from that breakout year, until we had the triple whammy of: 1) the shale revolution, 2) the after-effects of the Great Recession, and 3) a record warm winter, all come together last year.
I vaguely recall a poster on one of the energy boards that showed up around late '99 who went by the moniker "fourdollargas", and we all thought the guy was an idiot to be thinking natty could ever trade so high for a sustainable period of time.
Now finally to my point -- I'm starting to wonder whether this winter might be analogous to the winter of '99 - '00. First Enercast's newsletter is now calling for the storage levels to go more than 400 BCF below the 5 yr. average by early next month. I have been thinking all along that this cold was interesting but would probably only serve to delay the inevitable -- a situation similar to last year where the strong production serves to keep natty mired within something like a $.40 range centered around the $3.60 mark. But now I'm wondering whether the hole being dug by this extended stretch of very cold weather will be so deep that it will take a year or more of higher prices in order to allow storage to get back up to normal levels, by eliminating the gas-to-coal switching. Would be curious to hear what others have to say about this, thanks. |
