Natural gas prices near another 10-year low - Business, Government Legal News from throughout WV

High production, mild weather and significant storage continues to suppress the price of natural gas.

According to the Energy Information Administration, on April 18, the natural gas spot price at Henry Hub was $1.87 per million British thermal units, or MMBtu

"The April natural gas futures contract settled on March 28th at $2.191/MMBtu, the lowest settlement price for the NYMEX natural gas futures contract in over 10 years," the EIA states.

In the Marcellus shale region, those drilling for the gas are increasing moving their rigs to areas that produce "wet gas." The wet gas contains other hydrocarbons, many of which sell at a higher price than methane, the primary component of dry gas.

The low natural gas prices have been putting pressure on coal as power generators look to natural gas for power generation. For a long time, coal was a cheaper option, but environmental controls, increasingly difficult to reach supplies (particularly in Appalachia) and other factors have resulted in a decline in coal usage.

Techniques such as hydraulic fracturing and horizontal drillers have allowed many in the industry to continue drilling at low gas prices because the rate of return still allows drilling large-scale wells. One natural gas executive recently told The State Journal that drillers would be "much more comfortable" if prices were closer to $5 or $6 per MMBtu.

Storage levels of natural gas are currently at 2,479 billion cubic, or Bcf, for the week ending March 30. Those levels, according to the EIA are about 60 percent higher than the five-year average for the same week.

"U.S. population-weighted heating degree days were 18 percent below normal from November through March, reducing estimated, average residential and commercial natural gas demand by over 6 billion cubic feet per day (Bcfd) compared to the previous five-year average," the EIA said in a April 19 post.

The agency reports that winter of 2011-12 was much warmer than usual with the lack of cold weather reducing the need to deplete storage levels. Only the Pacific region noted a slightly cooler than normal winter.

Natural gas production had grown steadily in 2011, but began to level off for the first three months of 2012. According to the EIA, Marcellus production was responsible for most of the year-over-year growth in production.