Natural Gas Supply and Price Solid

Vincent Fernando|Dec. 11, 2009,
http://www.businessinsider.com/this-is-why-natural-gas-imports-will-flood-america-2009-12

Yesterday's huge natural gas rally has only made the U.S. an even more tempting market for seaborne Liquified Natural Gas (LNG) imports according to RBS. If the U.K. is any guide, this could be bad news for gas prices and, of course, great news for consumers.

RBS: The current rally has substantially lifted the prospects of LNG coming to the United States. LNG has done its job beating the price of UK gas down, and today's rally in US NG pricing certainly makes the US a considerably more attractive destination than it was only a couple of weeks ago. As the chart below suggests, as of today’s close, Transo-Z6 (non-NY) is at a $1.26 premium to NBP. Hello LNG.

Natural Gas

Thus the more natural gas rallies, the more foreign LNG will come and act to push prices downward. Still, there remain substantial U.S. infrastructure restrictions to accommodate LNG imports, so they can only grow so far... or go through Mexico.

Rianovosti: Gazprom CEO Alexei Miller met on Monday with Mexican Energy Minister Georgina Kessel and Mexican Ambassador to Russia Alfredo Perez Bravo to "consider deliveries to Mexico of liquefied natural gas with its consequent transportation to the U.S. market as part of the Sakhalin II project."

Long term, natural gas will be fine, but the global LNG glut just isn't helping right now.

(Chart via RBS, Natural Gas Weekly, Brison Bickerton, 10 December 2009)