- US natural gas production continues to surge forward, exceeding
our expectations… "US natural gas production continues to surge this year, driven by the shale gas revolution. As US production has exceeded our expectations, we are increasing our 2010 production by 3.0 bcf/d to 58.5 bcf/d on average for 2010. In addition, we are raising our 2011 production forecast by 3.7 bcf/d to 58.1 bcf/d. We still factor in a slightly declining production path over the rest of 2010, as we continue to expect some response to production from the lower conventional rig counts."
- … requiring reduced LNG production to balance the global market "We expect US LNG imports will need to remain low in order accommodate the increased US production. While we expect a tighter European market will be able to absorb a substantial portion of the LNG supply, we expect that global LNG production will need to remain restrained in order to keep the global gas market in balance. Consequently, we expect that global LNG production will likely be the price setting margin for gas in 2H10 and 2011."
- We are lowering our 2010 and 2011 forecasts as we expect lower prices will be required to restrain LNG production going forward "We are lowering our NYMEX natural gas prices forecasts to $4.63/mmBtu in 2H10 and $5.25/mmBtu in 2011, from $5.60 and $6.00 respectively. Further, while we expect stronger US production will put downward
pressure on UK NBP prices, we expect UK NBP prices will need to exceed US prices in order to direct LNG toward Europe. Net, we are lowering our UK NBP price forecast to $5.13/mmBtu (34.05 p/th) in 2H10 and to $5.75/mmBtu (35.20 p/th) in 2011, from $5.40/mmBtu (34.20 p/th) and $5.80/mmBtu (36.00 p/th), respectively. Should US production continue to
surprise to the upside, a return to more coal-to-gas substitution in power generation would likely be required to balance the market."
GoldmanSachs Commodities Natural Gas 20100716
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