Decline
in gas price seasonal
By
Sherwin Long
Trinidad Guardian
Port
Spain
Petroleumworld.com
07 09 06
Last
week, the natural gas futures contract dipped to
just under US$6 per million British thermal units
(btu) on the New York Mercantile Exchange, raising
questions about how this price decline will interfere
with the income T&T gains from selling the commodity.
Last
week’s price was close to an 18-month low
for the US natural gas market which peaked at US$15.78
per million btu in December.
T&T
is currently the number one exporter of liquefied
natural gas to the United States and the country’s
tax revenue has been boosted in the last two years
by buoyant natural gas prices.
For
energy experts, the impact of last week’s
price slide cannot be viewed in a vacuum.
Energy
economist Gregory McGuire said this week that an
analysis of the recent decline in natural gas prices
depended on a host of factors.
He
said while natural gas prices are currently trending
downwards, the price could be linked to a seasonal
decline.
It
is summer in North America and there is no need
for natural gas for heating.
Even
though in summer natural gas is used for cooling,
the majority of T&T’s LNG goes to the
eastern seaboard states which experience especially
harsh winters.
McGuire,
however, was quick to point out that a seasonal
decline may not be the only reason for a fall in
natural gas prices.
He
said comparing annual and quarterly price averages
for natural gas should be examined as over the years
specific trends could develop.
National
Gas Company (NGC) president Frank Look Kin said
in summer there was less demand in North America
for natural gas.
Other
weather patterns also play a role in the rise or
fall of prices.
Both
Look Kin and McGuire recalled Hurricanes Rita and
Katrina last year and how oil and natural gas prices
were boosted as a result of the natural disasters.
Look
Kin said in July 2005 natural gas prices took off
and continued into December 2005 before finally
petering out in March this year.
In
2003, McGuire said, the average US spot natural
gas price (per mmbtu) was US$5.32 while in 2004
and 2005 the average prices were US$5.76 and US$8.79
respectively.
McGuire
noted that gauging how fluctuating weekly prices
really impact on the nation’s coffers is a
challenge.
But
he said while referring to last week’s natural
gas price dip, to below US$6, that contract prices
are tied to market prices.
The
impact of lower prices for natural gas during some
months was not lost on Look Kin.
Interestingly
enough, the Central Bank’s annual economic
survey for 2005 highlighted that the energy sector
accounts for a 46 per cent share of government revenues.
Look
Kin anticipated natural gas prices to climb, yet,
he would not say how much last week’s price
drop affected revenue.
After
regasification and transportation costs are deducted
from T&T’s natural gas, Look Kin said
the country would likely feel the price decline
in our pockets.
“The
net back price is based on the final market place
price,” he added. “It is reflected in
how much money we receive.”
Link
between oil and gas
Energy
economist Gregory McGuire also saw the clear link
between rising oil prices and natural gas prices.
He said as oil and natural gas were substitutes
for each other, their rising and falling demand
and pricing was intertwined.
According
to a report by leading global investment banking,
securities, trading and brokerage firm, Bear Stearns,
oil prices for 2006 have been 15 to 20 per cent
higher than the 2005 average.
In
the report, Bear Stearns estimates that with continuing
tensions in the Persian Gulf and a higher demand
for oil in China and India, oil prices were more
likely to rise than fall.
Throwing
weather conditions and market cohesion into the
mix, the report noted that over the past four years,
the oil price surge caused not only a higher import
bill in US but also lowered real disposable income.
McGuire
also sees the increase of demand for T&T’s
hydrocarbon resources amidst rising prices.
“Only
five years ago, natural gas prices were US$2.50
or US$3 on the Henry Hub now there is a new order
of magnitude (with prices averaging from US$6 to
US$7),” he said.
“Oil
prices too are at a whole new threshold.”
At
the close of trading, on Tuesday, at the Henry Hub
trading index, natural gas was priced at US$6.09
(per mmbtu).
Trinidad Guardian /Thursday 6th July 2006
Copyright
©2006 Trinidad Guardian. All Rights Reserved.
