August 22, 2014

R^2 hosted a breakfast during Summer Nape in Houston on August 21, 2014. Thank you all for those who attended. It was a great success. Two of our analysts presented on current dynamics in the crude oil and natural gas markets.


Outlook for Natural Gas - The New Normal by George Romagus

Growing natural gas production in the US, coupled with inadequate take-away capacity has led to depressed pricing in Marcellus production areas. The same lack of infrastructure has contributed to pricing disconnects in the Northeast during bouts of cold weather, most notably this past winter. As production grows, plans for an additional 12 Bcf/d of take-away capacity have emerged, potentially easing distribution constraints and the reliance on storage in the not so distant future. Increased demand from LNG, power generation, GTL, and CNG potentially provide support for natural gas prices in the coming years.


Is Geopolitical Uncertainty a Hedging Opportunity for Producers? by Rishi Sahay

Today, geopolitical risk abounds as evidenced by substantial conflicts in Libya, Iraq, Syria, and the Ukraine, as well as an embargo with Iran. OPEC outages in the month of July exceeded 3 MMbpd. However, in the face of these outages, non OPEC supply growth (primarily US shale production) and greater production volumes from certain OPEC countries have filled the gap. Analyzing the price response to several geopolitical events reveals that the short term price response to concerns over supply is usually exaggerated, providing above average opportunities to hedge crude oil. In the current environment of continued non OPEC supply growth and possibly decreasing OPEC outages, the crude market is well supplied. In the near term, any geopolitical driven price spike would likely provide an above average opportunity for hedging.


The two presentations are available on the resources page. Please feel free to contact us at 713-522-6161 or send us an email at with any questions regarding these presentations or your current hedge programs.

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