Thursday, March 22, 2012

US natural gas hits another all-time low

The super-early spring in the US is bringing with it two things: terrible allergies due to high pollen count and really low natural gas prices due to too much inventory. Natural gas hit another low today with a 4% drop.

Natural gas futures contract (Bloomberg)

It is important to note that this is a US-specific phenomena. Globally natural gas prices remain elevated and the spread between the US gas price and prices elsewhere has been rising rapidly. "Lake Charles" refers to the Lake Charles terminal (Louisiana pipeline).

Natural gas prices (Source: Barclays Capital)

The only real way to arbitrage this divergence is with Liquefied Natural Gas (LNG) that can be delivered to these offshore locations. And it will be a while before the capability is there to export LNG on any significant scale.