Do you ever get the feeling that we’re living through the last few years of the present system?
The world feels in need of a massive, cohesive change. Everything appears to be in a bad way compared to how it was in the past. From economics to public services in most countries, we are seeing massive downgrades.
Everything appears to be out of sync with where it should be, and this is the same for both oil and natural gas prices.
Indeed, given their importance to so many functions that take place in the world, oil and natural gas prices usually are a sign of a confused world. US oil and natural gas prices have been increasing steadily, and now have reached a six-year high in terms of their pricing.
This oil-to-gas ratio has reached a market of around 30-to-1, which is massive. It’s expected that this could actually see a bigger change, though, with industry experts predicting even more gas price reductions. If that happens, gas prices will be at their lowest for 20 years!
The main reason is that US-based drilling firms aren’t actively looking for gas. Major companies in the industry such as Diamondback Energy Inc. and Exxon Mobile Corp. are looking for natural gas liquids and valuable oil ahead of natural gas.
This is a big reason why producers are able to sustain the rapid drop in gas prices across the last while.
An S&P Global Ratings report showed that they have dropped their gas price assumptions for the 2020 to 2022 period. The main reason includes: “By-product natural gas, which doesn’t adhere to the laws of supply and demand, accounts for nearly half of U.S. gas production.”
Meanwhile, by contrast, oil futures in the US such as Clc1 hit their highest levels since April 2019. By contrast, gas hit its lowest price since August 2019.
The fact that both of the commodities are moving in such different directions only helps to solidify the belief that change is happening – and shows no signs of going away anytime soon.
For the last five years, the ratio was closer to a 19-to-1 to 20-to-1 level. Now, though, the rise in oil prices mixed with the steep fall in gas prices means that this has changed.
With super-cooled liquified gas now trading at a much higher price, too, the US has little inclination to keep drilling for natural gas. That, then, at least goes some way to explaining why the markets appear to be in such a specific state.
Expect more information to come out about this interesting change in the industry as the year develops. As one of the most interesting contrasts in American energy, this should really help to showcase to people just how unique the US energy industry has become.
With such a wild contrast far exceeding what anyone would have assumed, who knows what happens next?