Natural gas futures prices continued to drop on Monday, falling to a new 10-year low, and industry observers are beginning to predict layoffs among small producers.
The news comes as the country moves into the spring months, when natural gas demand, and price, typically fall.
“Natural gas prices will remain depressed longer than many people had expected,” Fadel Gheit, an energy industry analyst with Oppenheimer in New York, told The Oklahoman on Monday. “Too much of a good thing is a bad thing. Too much oversupply of natural gas has depressed natural gas prices.”
Large and mid-size natural gas companies are shutting in production and are focusing new drilling in areas that produce more oil than natural gas. The state's smaller producers, however, do not always have those opportunities.
“They're going to have trouble,” said Mike Terry, president of the Oklahoma Independent Petroleum Association. “They're going to have to lay people off. They're going to have trouble paying their loans.”
The front month futures price for natural gas — sold Monday for delivery in May — dropped to $2.10 per thousand cubic feet, down from $4.98 in June and more than $12 in July 2008.
The Henry Hub spot price dipped to $1.99 per thousand cubic feet Monday, although local spot prices have sold for less.
George Taubel, on Monday, bought natural gas for a client for next-day delivery for $1.86 per thousand cubic feet.
“The bright spot for consumers is that they get a much better price, but it is a horrible thing for our state and our producers,” said Taubel, president of Tulsa-based Oklahoma Energy Services Inc. “We need some event of a catalyst to move this thing, but most people think there isn't much potential for that on the horizon.”