There’s been a lot of excitement lately about rising natural gas prices in the U.S.
The numbers in this market have indeed been eye-catching. With front-month NYMEX natgas rising 35% in the last two weeks alone. Topping $6 per mcf during the last few trading sessions.
The catch is that most of these gains have been driven by ultra-cold weather across the U.S. A phenomenon that’s guaranteed to be temporary.
Temperatures (and knock-on gas demand for heating) will get back to normal over the next few months. But some other key changes may be suggesting this is just the beginning for the natgas rally.
Most notably in key gas-producing state Pennsylvania. Where legal changes are afoot that could derail big production here.
Last week, the Pennsylvania Supreme Court upheld a decision to allow municipal governments in the state to regulate fracking. This legal decision had originally been set by the court last December. But pro-fracking campaigners–including the state government–had been pushing to have it reconsidered by the court.
There will be no review of the law. Opening the door for local governments in Pennsylvania to pass fracking bans–of the kind proposed in many pockets of America’s oil and gas backyard.
This could have a major impact on natgas production in a key area for supply. Fracking bans, if passed, will obviously halted drilling in some parts of the state. And the ensuing patchwork of legal regimes could slow permitting and the pace of expansion here.
That’s critical because the Marcellus is actually one of the few areas of the U.S. where natgas production is still growing. Most other shale gas plays have actually topped out–now seeing basin-wide production rates trending down.
If the engine of growth in the Marcellus sputters, it will greatly impact overall supply. And would provide an upward push for natgas prices. Especially coming on the heels of big drawdowns of stored natgas inventories triggered by the recent cold snap.
This is a development to watch. Data isn’t easy to find on overall Marcellus output, but I’ll be digging deep to track this trend. More for you soon.
Here’s to the real push for higher prices,
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