High stored up supplies and clement weather cause predictions of drops in natural gas prices

The persistently hot summer that has been reigning in Canada and the US has not bettered the slumping natural gas numbers, which have been more or less on the decrease in the past two years. The lingering downturn in the product, coupled with a few other factors caused many experts to issue grim predictions for the product in the coming quarters.

Oversupplying in the face of clement weather caused investors’ expectations to predict a 3% fall this year, as well as a 9% drop in the year 2011.

With the supply and demand ratio unbalanced, and the slower than expected economic recovery experienced by the region; much of the financial prognosis for area’s natural gas stocks is not particularly favorable.

A drastic drop in production rates needs to occur in order to allow the product to redeem itself in the heavily oversaturated market. Yet no such break is expected to happen, as natural gas production rates are due to see another 3% increase in the coming year.

This economical misbalance will likely continue until the rising production rates overshadow the faltering demand radically enough for the industry to take notice and cease some of its superfluous operations.

A cold spell is also needed to break up the sweltering streak that has also caused the continuous fall of the gas stocks.

At this moment, the high production rates are explained by the perpetual need for companies to drill in order to maintain shorter leases, as well as keep up the existing contracts will sooner or later be deemed as not worth the beatings the market has been taking for the past two years.

With the supposed rise in production already in place for the rest of the year, companies and investors hope that by the year 2011, when weather begins to worsen, and Western economy continues its mend more effectively; the abnormally high supply rates will finally be curbed, and stocks will be given a chance to rise again.

The demand for natural gas has seen a volatile stretch in the past few years, and until winter unfurls fully, paving the way for heaters to be turned on blast in Canadian and American homes, the market will not see any relief. Once the year dwindles down, and cold weather prevails, gas prices are expected to rise to somewhere between $5.25 and $5.50, yet if overall year-long demand numbers do not show signs of improvement, the price will start dropping.

As it stands now, natural gas rose a mere 4 cents yesterday, and settled at $4.30, according to the New York Exchange.