warm weather to crash natural gas prices, page-20

AZZ is the "standout" company amongst the Aussie oil and gas drillers in the USA. Technically it has broken to higher ground on volume which is very bullish. However, one needs to keep in mind as to what is happening to energy prices in the USA.

Natural gas prices collapsed in the middle on record setting cold weather here. Because shale gas/ new drilling technologies have led to a dramatic increase in production and resrves. U can see this in long term gas prices where prices max'd at at $11.00 in mid summer of 2008. Now in record cold weather they were struggling to hold $6.00. This morning they hit a new low of $4.035 pointing to potential newer lows.

As Spring rolls in heating oil prices will plunge from much lower levels. They also peaked in 2008 at $4.00 gallon. Now they struggled to hold $2.15 all thru the bitterest winter. Most homes in the North have heating oil tanks and cannot easily switch from oil to gas so one would imagine that already a significant amount of "switching" to cheaper gas is happening in the economy at other points to keep the price so low. Many reports say that U.S. reserves of natural gas are at point of a hundred year supply levels from shale formations all over the nation. And that excludes plentiful supplies from Alaska. So at some point the cost of switching from heating oil to gas becomes economic for homeowners and that switch will hit demand for heating oil in the Northern United States very hard.

Ultimately all of this switching starts to have a major impact on U.S. demand for crude oil which is mostly imported. Especially the heavier crudes used for heating. U can see this in the price of crude which is now having technical difficulties holding above $80.00. Demand for gasoline supplies is currently still very affected by poor economic conditions and probably not affected by the above issues at this stage. There are a number of efforts under way for conversion of local gas feedstocks to create synthetic fuels and production of local biofuels which has has a smaller impact on gasoline prices now and may impact in later years.