Natural Gas Glut Could Hit U.S., Prices Are Already at A 7-Year Low, Lowest Since December 2002

HOUSTON CHRONICLE -- As many as seven massive natural gas export terminals are expected to start up overseas this year, expanding worldwide capacity by 20% and flooding markets with new supplies of the key power plant and heating fuel. Dozens of new tankers capable of carrying natural gas in a liquefied form are slated to hit the seas. Just as these new supplies come on line, worldwide demand is expected to drop as the global recession deepens.

Operators of these new facilities are unlikely to cut back production, however, so shipments of liquefied natural gas will most likely head to the deepest markets with the greatest amount of natural gas storage capacity — the United States.

While LNG generally is sold in contracts between importers and exporters, its price is influenced by the price of natural gas traded on the New York Mercantile exchange, which closed Friday at 7-year low of $4.42 per million Btu (see chart above, data here).