Forecast of Crude Oil and Natural Gas in 2010

The MarketOracle presents a forecast of Crude Oil and Natural Gas in 2010:

The Energy Report: Let’s start with your big-picture take on natural gas because that’s one that seems to be retaining a low-price profile. People are talking about the high level storage, the improvements in production, the decrease in the cost of taking the gas out. What’s your view of what’s happening in those markets?

Keith Schaefer: I think that in 2010, natural gas is going to have what I call a ‘purgatory pricing environment,’ where it’s going to be low enough that most companies will not make money, but a few of the really low-cost producers will. If gas stays in the $5 to $6 range, that’s what I would call purgatory and anything less than that would just be hell. You’re looking at a situation where the all-in costs for natural gas production in North America is still around $6 to $6.50 per MCF. When the price is below that, few producers are making money.

So investors have to be very, very selective, particularly in Canadian stocks because these companies, for the most part, have high debt levels, higher pipeline costs and a higher Canadian dollar. So it’s going to be very difficult in particular for the Canadian juniors to give any real profits to investors, I think, over the next year.

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