They said it themselves: The year 2005 will be remembered for its hurricanes and record-setting natural gas prices, events that continuously grabbed the top headlines in the Natural Gas Intelligence newsletters, making them the longest-running top stories for the industry. Besides the actual hurricanes and consequent price spikes, it appeared that nearly everyone in a position to be quoted — congressmen, regulators, analysts, advocates, and industry executives — had comments, warnings, or prognostications about the events that roiled the industry. Other events — while important — only sporadically managed to shove hurricanes and prices out of the spotlight.
Furthermore: With bearish fundamentals finally in the driver’s seat of the gas market once again, futures prices have plummeted to about $9.50 from a peak of $15.78 on Dec. 13, 2005, and analysts are dropping their forecasts for 2006. Arlington, VA-based Energy and Environmental Analysis Inc. (EEA) now predicts Henry Hub prices will be back to $6.45 by April and eventually will hit $5.50 by October when all the shut-in Gulf gas production has returned.
And on Friday, the CRB Commodities Index hit its all time high, so this is what seems to be next: Profit for exploration and production companies, which has been soaring for the past two years, may fall well short of the 21% forecasted again this year because of rising service costs and lower commodity prices, with shares of natural gas-focused exploration and production companies possibly showing a steep decline over the coming months, an energy analyst said in a new report.
Which leads me to my market commentary, stuffed roughly into haiku:
Oh-five fire and flood
followed by my forecast
Oh-six stormy weather?