Hi Sushi1I've been watching the amounts of gas in storage too...

Hi Sushi1

I've been watching the amounts of gas in storage too but if Western economies are bottoming and production does begin to rise once more, that surplus could be re-absorbed very smartly. My prediction on gas prices is squarely based on recent year averages. The figures below (adapted from the excellent publication 'The Oil & Gas Weekly) show that when oil was around US$67 per barrel in November last year, gas was around US6.77 / mcf. Today, with oil around US$71, gas languishes at about US$3.84.

Month Oil(WTI)*Gas(US)**
March 61.64 7.26
April 65.87 7.73
May 66.46 7.83
June 65.08 7.88
July 70.68 6.77
Aug 75.48 6.09
Sept 76.70 5.50
Oct 81.66 6.87
Nov 95.93 8.42
Dec 88.71 7.45
Jan 08 97.91 7.84
Feb 88.79 7.74
March 101.38 9.37
April 104.95 9.84
May 118.52 10.91
June 127.71 11.70
July 140.54 13.20
Aug 125.10 9.39
Sept 115.46 7.94
Oct 93.88 7.36
Nov 67.81 6.78
Dec 54.43 6.51
Jan 09 46.34 5.97
Feb 41.68 4.42
Mar 44.76 4.19
April 52.51 3.80
May 53.20 3.55
June 66.31 3.84

I know the correlation between the two is somewhat elastic, but they have broadly tracked each other in recent years, with gas peaking over US$13.20 / mcf when oil hit US$140.

Like you I suspect, I'm not particularly bullish on the global economy as the driver for improved oil and gas prices. I view the curtailing of supply (that is the flow-on effect of sustained low prices) as the main catalyst for a turnaround in prices. Industrial demand may well stay low, but supply in most oil producing nations is simply uneconomic under US$70 / barrel. A sustained supply squeeze may well drive oil and gas prices higher even when global demand is not particularly strong.

You may very well be right about gas price trends in coming weeks, but I think a lot of gas producers are on the brink at these prices and will either shut wells in or go out of business altogether if prices don't pick up. That will sow the seeds of the next supply crunch and a new bull market for oil and gas.

AMU is fortunate in having a diverse production base and revenue stream plus very low production costs relative to most of its peers. In addition, its P/E ratio of around 3 is multiples below any others that I am aware of which have a similar production profile. As I wrote in an earlier post, most producers with a stable income stream like AMU's trade on a P/E of around 15.

The next production update should alert investors to this anomaly and perhaps be the catalyst the SP needs if it is to reflect AMU's true value.

Good luck all.

DYOR

Gupper