I’ve been looking at natural gas prices lately, thinking about the future. It seems to me that the worst is over and prices will certainly improve. Of course, that’s not much of a stretch because they are so low now. But as Billy Crystal famously said in The Princess Bride, there’s a big difference between mostly dead and all dead.

And yet, bear-market factors are everywhere. Shale-gas production is burgeoning, and the recent Potential Gas Committee report details a substantial jump in the U.S. resource base. It would appear that shale-gas technologies have unlocked copious new supplies.

Too, the volume of gas in storage is running well ahead of last year’s levels, and also above five-year averages. We will likely go into the winter heating season with storage reservoirs chock full. At the same time, domestic industrial demand for natural gas remains soft.

Global LNG production and its potential impact on U.S. gas prices are additional wild cards. New supply trains are rapidly coming on stream around the globe, although worldwide gas demand is down. All this LNG has to go somewhere, and it might well come here.

Counteracting these forces, there are rumblings that production declines are already showing up in the Barnett shale and certain Rockies basins. Some companies have shut in gas production, reluctant to sell into current low prices. In my mind, the huge drop in drilling during the past year surely has to translate into less supply. And, U.S. economic recovery could just possibly be under way.

For no good reason other than a generally optimistic outlook, my personal forecast is for a modest improvement in natural gas prices this fall and winter. Mostly dead means slightly alive, after all.

--Peggy Williams, Senior Exploration Editor, Oil and Gas Investor

Contact me at pwilliams@hartenergy.com