outlook for natural gas prices
In all, over the course of the current downturn, natural gas prices declined from a high of $15.78 per million btus (mmbtu) in Dec 2005 to a low of $1.90 in April 2012 -- a breath-taking nosedive of 88%.
The reason was an enormous supply glut driven largely by major new unconventional shale plays like the Marcellus and the Bakken where hydraulic fracturing (fracking) has revolutionized the industry.
In fact, fracking helped drillers to produce over 24 trillion cubic feet of natural gas last year, with over 70 billion cubic feet coming from the Bakken Shale alone.
These new finds meant the U.S. natural-gas market was flooded with an average of three billion cubic feet more natural gas every day than the United States consumed.
But those days are coming to an end as supply and demand begin to balance out, setting the stage for rising natural gas prices.
In fact, natural gas prices have already rallied to $3.40 per mmbtu, up 79% in just six months
But regardless the day-to-day movements, the long-term outlook for natural gas prices remains bullish, particularly in light of a steady increase in demand.