The Impending Natural Gas Inflection
The five-year charts make for a tough sell, but some in the Invstr community think natural gas producers will see their shares soar amid the oil oversupply crisis. It’s an interesting idea; stateside oil drilling must stop, stateside oil drilling by-produces natural gas, and an end to the by-production of natural gas will make it more valuable!
We need to turn back the clock to when the US didn’t produce much energy. In 2005, it only supplied half its domestic demand, very worrying. The country was importing from the wrong crowd; Russia, the Saudis, and you can’t make good deals with bad people.
Against this backdrop, “horizontal fracking” was invented. It’s the energy sector’s greatest technological breakthrough; a sidelong drill that drives sand into the ground to fracture channels open for oil and gas to escape. Ingenious!
It not only made drilling economical for entrepreneurs; it created a massive shale boom. Rampant production ensued, and the USA became self-reliant at last!
It’s key to know that natural gas often accompanies oil out of the ground. The sticky stuff gets pumped to the surface, and then it’s like opening a can of fizzy drink. You rarely achieve natural gas production without oil by-production or oil production without natural gas by-production. You getting this written down?
Yields per drill are also not one-to-one; gas is far more abundant. That’s why enough natural gas was produced to meet demand sooner than oil. Alas, it made sense for the oilmen to press on, and that’s why we have a massive natural gas oversupply today.
It flares out of towers, sells for dirt cheap prices, and investors in gas producers are not happy one bit!
If only there were something to stop the oilmen. If only there were something to throw a spanner in their works, like a pandemic, a chronic oil oversupply, or a storage crisis.
If only the price of oil was too low, maybe even posing an existential threat to the survival of shale. If only West Texas Intermediate one-month futures contracts were down less than $0.
We can dream!