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Prices Fall Below Zero as Analyst Declares ‘Very Precarious’ Market for Natural Gas

With the value of their product occasionally falling below zero—meaning they would have to pay customers to take it off their hands—Canadian natural gas producers may soon face a business reckoning driven by continuing low prices, CBC reports this week.

With supplies growing considerably faster than demand, the Canadian market has suddenly become “very precarious,” GMP FirstEnergy commodities analyst Martin King told an industry audience Wednesday morning.

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Gas prices have been low for years, King told the executives. But when they briefly crashed even farther, “it cost more to get it out of the ground then to buy it on the spot market,” he said. “It’s a very, very unusual situation. I’ve never seen anything like it.” 

The anomalous moment was driven by pipeline maintenance that cut off producers’ access to storage and caused supplies to back up. But “for an industry already struggling, this summer was exceptionally tough, and the upcoming winter may be just as bad,” CBC notes. “Natural gas producers are hoping Mother Nature serves up a cold winter across North America, after a few unusually balmy years. [You’d almost think the fossil industry was vulnerable to, y’know, climate change. – Ed.] Frigid temperatures would lead to more natural gas being burned to heat homes and businesses.”

But for companies that are already on edge about prices and profitability, there may be a wake-up call ahead.

“For companies more exposed to spot gas prices, what are you going to do? You can’t run an industry off 25¢ gas prices, so a lot of guys are starting to ask questions,” said King. “How sustainable is this? How long is this going to last?”