Oil prospects much better than natural gas
Jan. 14—This year opened with a much better outlook for oil than for natural gas.
Oil prices will probably be strong all year, maybe reaching $100 a barrel, but gas is in the dumps with no immediate chance of escape.
"For this time of year, gas prices are bizarrely low," said Odessa oilman Kirk Edwards, referring to Wednesday's $3.681 per thousand cubic feet following peaks of over $8 last year.
"Oil and gas are a tale of two cities. Oil looks to be finding a footing with a base in the $70s and it still has so much room to run up because of the situation in Europe, what the Biden Administration has done to the Strategic Petroleum Reserve and China coming back to full strength.
"You should be optimistic for oil if that is your primary commodity."
Edwards said gas is getting whomped by the abnormally warm American winter and the Federal Energy Regulatory Commission's continued shutdown of the Freeport Liquefied Natural Gas Development on the Gulf Coast after the plant completed repairs months ago from fire damages last June.
Having slapped down 64 new requirements just as the plant was about to resume operations in mid-November, Edwards said, the FERC is topping Emperor Nero, who fiddled as Rome burned, by fiddling around while Europeans freeze.
"Natural gas is the opposite from oil with the Freeport LNG facility, the biggest LNG exporter in the country, being held in limbo by the Biden Administration," he said. "The administration will not let them get going and that is two billion cubic feet of gas per day that's not getting liquefied.
"It's backing up into the American domestic system with a very dampening effect, especially for guys drilling in the Permian Basin who are seeing literally zero prices for their gas.
"I don't know what the holdup is," Edwards said. "They're not going public about it, but at the same time the Freeport LNG is not being allowed to operate."
The FERC did not respond to a recent request from the Odessa American for an explanation.
Asked if Biden and the FERC are punishing Freeport LNG for the fire, Edwards said, "It makes sense if they want to keep the natural gas price low in the United States because that's exactly what they're doing, but our European friends are freezing to death because they can't get gas."
As one of the Panhandle's largest natural gas producers, Edwards predicted that oil will stay between $75 and $100 per barrel for the rest of this year as gas flutters from $3 to $8 per thousand cubic feet.
"That's a huge range, but it's very predictable that it'll fall somewhere in there," he said, adding that Russian oil will also be a factor along with how much Saudi Arabia wants to pump.
From Calgary, Alberta, Canada, Enverus Intelligence Research predicts a return to $100-a-barrel oil "while natural gas prices are anticipated to remain weak, around $3.50, in North America given limited expected U.S. export growth."
EIR Managing Director Dane Gregoris said geography "will continue to play a deciding factor with oil growth around deepwater opportunities in Latin America by the middle of this decade as well as expansion in the Permian Basin and the Haynesville and Montney."
The Haynesville Region is in East Texas and Louisiana and the Montney Formation in the Canadian provinces of British Columbia and Alberta.
