Four Reasons Natural Gas Could Explode


Natural gas has rallied lately, even while many other commodities were falling, partly due to expectations of a cold winter in the U.S..

Still, for investors in Unites States Natural Gas (UNG) and other gas-related investments, here are four threats to watch out for, courtesy of ETFdb:

1. A massive South China Sea discovery.

“Calgary-based Husky Energy announced this week that it made its second major natural gas discovery in the South China Sea, a field that could ultimately yield more than 140 million cubic feet of natural gas per day. The new well was just 23 kilometers from the Liwan gas reservoir that the company discovered in 2006. Husky is planning to drill an appraisal well early next year in order to gauge the new well’s potential.

Production at the well likely wouldn’t begin until 2013 at the earliest, but expectations for a major increase in global supplies could weigh on natural gas prices long before then. The world’s proven natural gas reserves are believed to be in excess of 175 trillion cubic feet, so the additional South China Sea supply isn’t exactly a drop in the bucket….” Read more here at ETFdb.

2. Exxon’s LNG projects.

“Last month Murwab, a Qatari liquefied natural gas tanker, carried enough gas to the U.S. to heat nine million homes for a day, adding to inventories that are already at record levels. Tony Regan, a former executive for Royal Dutch Shell’s LNG business recently described the U.S. as “the sink for cargoes that can’t go anywhere else,” suggesting that increased LNG activity could translate into even bigger supplies to U.S.-based users of natural gas.

Exxon Mobil announced on Tuesday that it will move forward with a $15 billion liquefied natural gas project in Papua New Guinea. The project’s approval now hinges on securing sales agreements in Asia, which is expected to be completed sometime next year according to Exxon….” Read more here at ETFdb.

3. Low rig counts.

“As of late November, the domestic oil and gas rig count was down about 44% from its peak in September 2008 but 30% above the bottom experienced in June 2009. Looking only at U.S. natural gas rigs, the count stood at 748, up only about 10% from the June lows… ” Read more here at ETFdb.

4. Rising natural gas inventories in the U.S..

“The Energy Information Administration’s report for the week ended November 27 showed that inventories actually increased by 2 billion cubic feet over the previous week, the first time in several years that inventories have increased this late in the calendar year….” Read more here at ETFdb.

Also, check out why Exxon sees a mega-trend for natural gas ahead.

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