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Barclays Cuts 2012 Natural Gas Price Outlook by 75 Cents to $3

Sunday, 29 January 2012 | 00:00
Barclays Capital cut its outlook for natural gas prices by 75 cents to $3 per million British thermal units in 2012 and $3.50 in 2013, citing rising supplies and low prices.
High inventories, drilling economics as production from shale reserves increases, and midwinter gas prices in the mid-$2 range contributed to the revision, Thomas R. Driscoll, an analyst at Barclays Capital in New York, said in a note to clients today.
“We estimate that 60-80% of production additions from current drilling activity will come from fields that are economic below $4,” Driscoll said. Most gas drilling is already economic below this price and production will continue to rise as long as the expectation exceeds $3.50 to $4 for future prices, he said.
Gas pumped as a byproduct of oil and other liquids will account for about 75 percent of gas output gains this year and as much as 90 percent in 2013, Driscoll said. The growth of the associated gas will probably keep rising as long as oil stays above $75 a barrel, he said.
Natural gas for February delivery fell 14.9 cents, or 5.5 percent, to $2.58 per British thermal unit at 1:12 p.m. on the New York Mercantile Exchange, down 43 percent from a year ago. Crude oil for March delivery rose $1.30, or 1.3 percent, to $100.70 a barrel.
Source: Bloomberg
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