Why Natural Gas Prices Collapsed

gas storage

U.S. natural gas prices have collapsed since the end of winter, even as inventory levels remain below average levels for this time of year.

Henry Hub prices spiked in the fourth quarter of 2018 due to record levels of demand, cold weather, and historically low inventories. But prices remained elevated, over $4/MMBtu, for only a brief period of time. Production continued to soar, so traders were not overly concerned about market tightness.

As peak winter demand season drew to a close in March, prices continued to ease, and prices have eroded steadily in the last few months. Prices dipped below $2.30/MMBtu recently, hovering in that range for the first time in roughly three years. As recently as December, prices were twice as high as they are now.

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Maybe The Recovery Wasn’t Real After All

By John Rubino – Re-Blogged From Dollar Collapse

For a while there it looked like the US and its main trading partners had finally achieved escape velocity. Growth was up, inflation was poking through the Fed’s 2% target, and most measures of consumer sentiment were bordering on euphoric.

Then it all started to evaporate. Lackluster manufacturing and consumer spending reports sent the Atlanta Fed’s reading of Q1 GDP off a cliff to less than 1%:

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Venezuela Chaos: The Biggest Threat to Cheap Oil

Venezuela’s deepening chaos could soon create tremors in the global oil markets.

Already in an economic and humanitarian crisis, Venezuela’s oil production — the country’s sole lifeline for revenue — has hit a 13-year low.

As the situation worsens, Venezuela’s oil output could plunge even lower. A new report by Columbia University’s Center on Global Energy Policy calls Venezuela a “growing supply risk for oil markets in 2017.”

Oil prices are currently around $45 a barrel, a dramatic drop from about $110 two years ago. The main reason for the low prices is that there’s too much supply globally. However, the line between oversupply and a shortage in the oil market is thin, and Venezuela could tip the scale in the opposite direction.

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Destroying Crude Oil Price Rally – Something Dark Emerges from the Tar Pits and Oil Sands

By David Haggith – Re-Blogged From Great Recession Blog

The crude oil price rally has been completely destroyed, though I’ll admit I was wrong when I predicted crude oil prices would plummet in March or April as the perfect storm developed against oil prices. Instead, they rallied. In spite of that, I continued to believe my error was in timing and not in fact — not in the fact that another harsh fall in oil prices was beating a path to our doors.

Crude oil prices beaten down by a storm still building

So, I continued to write articles about the forces building against oil prices, even in the face of a strong rally, which many believed would set a new position for oil for the remainder of 2016. That storm has, as of today, completely clawed back the post-March rally by taking crude oil prices back to a three month low and to where they stood at the start of the year as well. West Texas Intermediate just struck $42/barrel today.

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Oil Town Americans Late on Car Loan Payments

By Matt Egan – Re-Blogged From CNN Money

Stress in the oil industry is starting to contaminate other parts of the American economy.

For the first time since oil prices began crashing in mid-2014, banks polled by the Federal Reserve are warning of a “spillover” effect onto loans made to businesses and households in energy-dependent regions of the country.

Senior loan officers of nearly 100 banks acknowledged that credit quality has “deteriorated” on everything from auto loans and credit cards to commercial real estate mortgages. Translation: More people aren’t paying and delinquencies are rising.

It’s a sign of how the deep spending cuts, mass layoffs and even bankruptcy filings in the oil patch are inflicting real pain in certain energy-focused states like Texas and North Dakota.

Some large U.S. banks have individually warned of early signs of so-called contagion.

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Oil Fallout: Laid Off Saudi Workers Torch Buses

By Matt Egan – Re-Blogged From CNN-Money

The Saudi Binladin Group, a massive construction company founded by the father of the late al Qaeda leader Osama bin Laden, has laid off at least 50,000 workers, according to local press reports.

The job cuts come as the Saudi government has delayed payment to construction firms and cut spending to grapple with the plunging price of oil, which makes up three-quarters of the government’s revenue.

Saudi-based newspaper al-Watan reported the Binladin Group terminated the contracts of 50,000 workers — mostly foreigners — and has given them permanent exit visas to leave the country. Some workers refused to leave the kingdom because they claim the company has not paid them for months, the paper reported.

The Saudi military confirmed to al-Watan that protesting workers torched seven buses in Mecca — a rare sight in Saudi Arabia, which Human Rights Watch has criticized for cracking down on free speech and imprisoning peaceful dissidents.

The layoffs are on top of the 15,000 workers cut last year after the Binladin Group’s contracts were frozen when a crane collapsed at Mecca’s Grand Mosque last year. The incident killed more than 100 people and the company was involved in the expansion project.

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Sheen on the Oil Slick Getting Darker

By David Haggith – Re-Blogged From The Great Recession

Last week, I wrote that the day would come soon when oil prices would take another nasty dive because there is nowhere left to store oil, causing the spot price for immediately delivery to dive toward the zero bound. This week we see how close that day is as oil continues to be oversupplied by about a million barrels a day.

Reasoning simple: When all ships, tank cars, tank trucks and tank farms are finally full, immediate delivery of oil will be nothing but a liability. That kind of delivery is called “an oil spill” because all you can do is pump it onto the ground or into the sea … or start filling swimming pools, as one oil industry analyst said is the next step. Production will have to slow to whatever the rate of consumption is, as it will become a situation of one tank used before one tank is bought.

Oil practically spills over in Rotterdam

The Wall Street Journal reported on Monday that oil tankers are backing up at the world’s largest oil seaport. In fact, buyers and sellers of oil are increasingly sending tankers on longer voyages just to avoid a pile-up of tankers at several ports.

Up to 50 oil tankers are waiting to unload cargo in the port of Rotterdam, the highest number since 2009 and another sign that, amid a glut, crude is struggling to find a home. (WSJ)

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Greens Terrified Cheap Energy Will Kill Wind and Solar

By Andrew Follett – Re-Blogged From http://www.CFACT.org

Cheap coal, oil and natural gas are outcompeting wind and solar power despite massive government support, and environmentalists are really upset about it.

“I believe low energy prices may complicate the transformation, to be very frank, and this is a very important issue for countries to note; all the strong renewables and energy efficiency policies therefore may be undermined with the low fossil fuel prices,”  Fatih Birol, the executive director of the International Energy Agency (IEA), told reporters in Brussels.

Americans are spending less on energy than they have at virtually any other point in recent history. Energy prices dropped by 41 percent in 2015 due to innovative new techniques to extract hydrocarbons, like hydraulic fracturing and horizontal drilling.

Wind and solar big

Environmentalists are also terrified that the rise of cheap conventional energy will hurt wind and solar.

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Obama Oil Tax Will Increase Gasoline Prices

By – Re-Blogged From Capitalism Magazine

It seems that Obama, while gladly taking credit for the drop in gas and fuel prices, desperately wants them to rise again.

President Barack Obama will propose a $10-per-barrel charge on oil to fund clean transportation projects as part of his final budget request next week, the White House said Thursday.

Oil companies would pay the fee, which would be gradually introduced over five years. The government would use the revenue to help fund high-speed railways, autonomous cars and other travel systems, aiming to reduce emissions from the nation’s transportation system.

It’s a classic example of manipulation. “We don’t want you to drive. We want you to use trains, buses and other travel systems instead. Instead of passing a law forbidding you to drive a car, which even Republicans might not permit just yet, we will pass a law making it less possible for you to afford to drive your own car. We will still call it a choice.” This is what manipulators do.

Obama said Friday that the investments would put the United States in a “much stronger position” in the coming decades, particularly if oil prices start to rise again. It makes more sense to levy the charge now while gas prices remain low for consumers, he contended.

This is also what manipulators do. “Raising the cost of oil is for your own good. It’s going to rise again anyway. So let’s get it over with now. Instead of reserving your pain for the future, or giving you time to plan for such price rises in the market, let’s impose the pain right now.” It’s also what sadists do. Masochists accept the pain, and welcome it as their due by their masters.

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Why OPEC Can’t Kill the U.S. Oil Boom

By Matt Egan – Re-Blogged From http://money.cnn.com

OPEC all but declared “mission accomplished” this week in its efforts to thwart U.S. oil production. In a report Monday, the cartel predicted the U.S. shale oil boom could be over by the end of 2015.

The world has too much oil production at the moment, and it has caused crude oil prices to meltdown from over $100 a barrel in the summer to under $45 now — a six-year low.

Someone needs to scale back, but OPEC, led by Saudi Arabia, has refused to make cuts in an effort to squeeze American shale producers.

OPEC is claiming an early victory by pointing to declines in the number of U.S. drilling rigs and significant cuts in big energy’s spending plans as evidence the U.S. is caving.

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Record Global Oil Demand: Even As The Price Of Oil Declined

Guest Post By SRSrocco From http://www.Silver-Phoenix500.com

There is this notion put forth by the media that a decline in global oil demand caused the huge drop in the price of oil.  Ironically, global oil demand is higher than ever… that is, according to the IEA – International Energy Agency.

Not only did the world consume the most oil it had ever in the third quarter of 2014, it was 600,000 barrels per day more than it did in the same period last year.  In Q3

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When Exactly Are Falling Prices Bad?

Peter-Schiff   Guest Post By Peter Schiff

The sudden fall in the price of oil provides a unique opportunity to examine the widely held belief that deflation is economic poison. As many governments and central banks have vowed to fight deflation at all costs in 2015, the question could hardly be more significant.

While falling prices may strike the layman as cause for celebration, economists believe that it can kick off a nasty, and often inescapable, negative cycle, which many believe leads inevitably to a prolonged recession, or even a depression. However, these same economists acknowledge that falling energy prices may offer a stimulus, equivalent to an enormous “tax cut,” particularly for lower and middle

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Could An Energy Bust Trigger QE4?

Peter-Schiff   Guest Post By Peter Schiff

In a normal economic times falling energy costs would be considered unadulterated good news. The facts are simple. No one buys a barrel of oil to display above the mantle. No one derives happiness from a lump of coal. Energy is simply a means to do or get the things that we want. We use it to stay warm, to move from Point A to Point B, to transport our goods, to cook our food, and to power our homes, factories, theaters, offices, and stadiums. If we could do all these things without

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cropped-bob-shapiro.jpg   By Bob Shapiro

If the only tool in your kit is a hammer, pretty soon every problem starts to look like a nail. I’m not sure where I hear that, but I’ve seen that phenomenon in action.

I read an otherwise excellent recounting of the travails of Russia and its Ruble during the last few months, as their major exports, oil and gas, have plunged on world markets. As oil and gas prices have gone down, so has the foreign exchange value of the Ruble, by a comparable

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Lower Oil Prices

cropped-bob-shapiro.jpg   By Bob Shapiro

Oil prices have been falling recently. As with so many things, this creates winners and losers. Consumers of oil & oil products, consumers of oil substitutes, and consumers of goods produced using oil all benefit. The steeper the drop (30% off the most recent high) the greater these consumers benefit.

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