Crunch Time     Time for Natural Gas         Current Oil Outlook             It IS the dollar! First the April numbers. The EIS portfolio was up 11% for the month, about the same amount as the oil and services indexes, a bit better than the S&P. Year to date being up 8% is good relative performance. About 3% of it was due to the options on futures strategy. I added an option on some late 2011 natural gas futures contracts. I also disposed of most …

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Since natural gas is more of a regional market than oil, which is more global, we Norte Americanos tend to estimate future gas prices with reference to factors such as likely Canadian supply and local inventory levels.  But imports of LNG are increasingly important to our continent’s gas price.  To obtain LNG deliveries, our terminals bid against those in Europe, Asia, and elsewhere.  Recently our gas prices have been lower than some abroad thus diverting some LNG shipments away from the the U.S.   In Europe and Asia these days …

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The largest Russian natural gas producer, Gazprom, apparently has heard the concerns of its European customers.  While they have been worrying that there will not be sufficient gas supplies, and while Gazprom’s production has been falling, the company has been spending it’s funds on investments that do not increase gas production.  All that is about to change, according to the following report:

International
Gazprom’s New Focus On Production
Oxford Analytica 04.24.08, 6:00 AM ET

Russian gas export monopoly Gazprom plans to increase investment in gas production and …

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One of the things I love about the Financial Times (the “pink” paper) is that their articles are short and to the point and they do not bleed from one page to another.  Anyway, the following piece from today’s paper puts further flesh on the bones of my recent LNG post to the point that U.S. natural gas prices are under pressure from the higher prices extant in other countries because U.S. ports are being outbid for LNG shipments.  This piece highlights Asian demand factors.  It also describes changing …

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An in-depth report on the market for natural gas in today’s Wall Street Journal focuses on the competition between the U.S. and Europe for LNG.  The price of gas over there is around $20 per mmcf, nearly double that here.  So there is good reason to suspect that over time the two prices will come closer as either supplies loosen up there or prices rise here in order to attract more LNG.  Most of the fundamentals that I have notice recently suggest prices will more likely remain high in …

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An area 775 miles northwest of Calgary in B.C., the Muskwa shale in the Horn River Basin, could become one of the largest gas fields in North America.  Companies with leaseholds include EOG Resources, EnCana,Nexen, Deven, and Apache.   News of initial drilling successes has moved some of the stocks substantially higher.  While the find is being compared with the Barnett shale in scope, the gas may be more difficult to extract and transport.  Moreover, native tribes control much of the surface rights and permits are required. 

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There seems to be much less discussion and analysis of the supply and demand dynamics for natural gas than for crude oil and other liquids.  Here is a link to the web site of the Natural Gas Supply Association, an industry trade group, that is replete with data and information about supply and demand vectors. This web site maintains that unproven NG reserves in the U.S., according to several sources that are presented, are about 6 - 9 times the proven reserves.  If such reserves become …

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2008 Thus Far: A Preview of Coming Attractions

My concern has been that at some point shortages of oil will cause a falling-stocks, rising-oil phenomenon that will crush my oil related stocks along with the whole market. 2008 has started like that. Oil was up 6.34% as of 2/29 (per the ETF symbol OIL) but stocks were down 8.5% (in terms of the S&P 500 ETF symbol SPY). For oil-related stocks, the falling stock market trumped the rising oil market, as I have expected. IYE, a broad-based oil-stock ETF, was down …

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Ukraine’s Naftogaz Ukrainy says Gazprom has cut shipments by 35 pct 03.03.08, 9:42 AM ET KIEV (Thomson Financial) - NJSC Naftogaz Ukrainy said OAO Gazprom has cut natural gas supplies to Ukraine by 35 pct, 10 percentage points more than the supply cut announced this morning, Interfax reported. ‘According to the latest statistics from Ukrtransgaz, supplies have been cut by 35 pct, or by 46 million cubic meters per day,’ a Naftogaz Ukrainy spokesman said. A spokeswoman …

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An enormous discovery of natural gas fields in the northeastern Horn River Basin area of British Columbia has caused several stocks to take a vertical price trajectory.  The new fields are made feasible to develop thanks to new horizontal drilling and subsurface fracturing techniques.  On the other hand, the cost of drilling such wells is huge.

Here is a more complete report:
Huge discoveries in northeast ignite ‘massive land grab’ for drilling rights
DAVID EBNER

From Monday’s Globe and Mail

March 3, 2008 at 4:03 AM EST

CALGARY — The remote and rugged northern fringe of …

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According to a report in The Oil and Gas Journal (2/18/08), the Nigerian government has declared that natural gas producers must sell an increasing amount of their production into the domestic market at less than market prices.  Such a policy is obviously a form of taxation or confiscation of the private companies by the government.  While the policy is understandable, it also is having the predictable affect of limiting the interest of foreign companies in investing in gas production efforts in Nigeria.  Thus, Nigeria has a sort of …

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According to a report in The Oil and Gas Journal (2/18/08) an extremely cold winter has put severe pressure on Iranian natural gas supplies, which is impacting other parts of their economy.  The weather has increased residential and commercial NG use 18% so that it now consumes 90% of production. Strained NG supplies have hurt oil production which is (unbelievably) pressurized by injection of, you guessed it, natural gas. The affected oil fields produced 930 kb/d if oil last year.  Gas pressurization is down by 33% - 75%.  …

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SAO PAULO, Brazil: Brazil’s state oil company said Monday it has discovered a huge natural gas reserve off the coast of Rio de Janeiro that could be as big as the recently discovered Tupi oil field.

Petroleo Brasileiro SA said in a news release posted on its Web site that the potential reserves in the new field were located about 5,100 meters (16,800 feet) below the surface of the Atlantic Ocean.

Petrobras did not provide any figures on the size of the reserve, but said “its structure could have dimensions that …

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Time to Step Aside

Greetings from snow-bound Crested Butte. CO.  I was supposed to be driving to California this weekend for two weeks on a Sausalito houseboat, but the gigantic west coast storm moving in my direction changed my schedule. The storm may be fortuitous – and symbolic. It provides time for reflection on the storm that raged in the stock market last week. And also the Iowa electoral storm that shook up the political world.

The stock market looks a lot like last August when the credit and mortgage market problems …

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2008 drilling activity to produce natural gas in Canada is expected by one estimate to continue the drop experienced in 2007.  Oil sands activity that uses natural gas is expected to continue to grow.  Thus the U.S. can expected a continued drop in imports of natural gas. read full post

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