Nat gas breaks $3.00 but not to worryIt important to keep our eye on the ball here. It may appear disconcerting to some that NG prices break $3.00 but when the commodity is offered at these levels it literally flies out the door! Remember we are talking about something that is heading inexorably towards deficit!
Now swing over to the price of West Texas today. Yes! Down again. I cannot see the price getting any legs until we can see some clear momentum developing that indicates that we are working of the excessive inventories. That will take time.
On BNN this AM I read that the Saudis are telling OPEC that they have cut back on their exports more than any other time in the last 8 years. That tells me that the Saudis are probably making up for the others who signed the supply cut agreement who are probably soon (if not already) starting to cheat. Remember, it’s the Saudis’ reputation that’s on the line here so they will cut deeply to make it look as if the agreement is holding. But do you really think the Russians will honor the agreement? Not a chance. They are already discussing the return of Snowden to the U.S. to gain a little leverage with Trump. These guys are chameleons.
Why do I digress you ask? Because if the oil rigs stall here because the price of crude remains flat you will not have any associated NG production to speak of coming from the oil drillers. And we know that the dry side plays like the Barnett, Haynesville etc. are not profitable at current prices. So you get no incentive to boost NG production from either side of the drillers. Call it what you want. Conjunction of the planets or ticking time bomb but NG is going higher.