In early August, I went out on a limb with a pair of calls on natural gas. First, I argued that due to the ability of operators like Anadarko Petroleum
The $2 handle on natural gas came just about two weeks later. After briefly retaking the $3 level last week, gas futures are touching new 2009 lows today. That brings us back to my first point regarding softer-than-expected industry-wide production declines.
At the end of each month, the Energy Information Administration reports national gas production on form EIA-914, with a two-month lag. Last week we got the June data, and it does little to dispel the case for lower natural gas prices. Across the lower 48 states, daily production actually showed an uptick of 0.5% compared to May. In my mind, you might as well call that flat production, but it's certainly not the sort of result you'd typically expect after such a vertiginous drop in the rig count.
I should point out that Gulf of Mexico production came in much higher sequentially, at the highest rate in close to a year. BP's
Looking onshore, though, the only decline of any size was in New Mexico, which saw daily production drop 3% sequentially. Texas -- which accounted for a third of nationwide volumes, partially on account of Devon Energy
Again, I do believe that decline rates will carry the day eventually. The bottom for natural gas still lies ahead, though, so forget about picking up shares of the U.S. Natural Gas Fund