Goldman cuts its forecast for natural gas prices

Gas flames
Source: DollarPhotoClub

While the prices of both Brent crude and natural gas continued slipping today, analysts at the investment bank, Goldman Sachs, cut its natural gas prices forecasts.

The price of Brent fell 65 cents to $48.95 a barrel today on the London-based ICE Futures Europe exchange and natural gas for February delivery fell to $2.916 per million British thermal units in electronic trading on the New York Mercantile Exchange,

Consequently, Goldman Sachs, which predicted that oil prices will slip as low at $42 per barrel in the first half of 2015, cut its natural gas price forecast for this year to $3.10 per million British thermal units from $4 and 2016’s outlook to $3.80 from $4.50.

“In our view 2016 will represent the beginning to the demand response phase of the shale revolution, as broad-based capital investments are due to expand the ability of consumers to take advantage of U.S. shale supply,” Goldman Sachs said in a statement.

Some analysts predict that falling oil prices will cause companies to return to previously abandoned gas fields. There is some evidence in resurgence of interest in the forgotten Haynesville shale. These analysts believe that gas prices in the U.S. may yet rebound, pushed up by the demand caused by new LNG facilities (Sabine Pass is set to come online late in 2015), a renaissance in manufacturing, that relies on cheep feedstocks, and the fact that many coal plants are being converted to gas.

Goldman Sachs, however, remains unconvinced believing that the market will remain oversupplied over the coming year, due to ‘strong’ North American output.

U.S. natural gas slumped 32 percent last year as new drilling techniques boosted supply by unlocking shale formations. Oil plunged almost 50 percent in 2014 as the U.S. pumped crude at the fastest rate in more than three decades.

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