{"id":24639,"date":"2011-10-21T11:00:28","date_gmt":"2011-10-21T15:00:28","guid":{"rendered":"http:\/\/countingpips.com\/fx\/2011\/10\/21\/little-known-phenomenon-could-send-natural-gas-prices-skyrocketing\/"},"modified":"2011-10-21T11:00:28","modified_gmt":"2011-10-21T15:00:28","slug":"little-known-phenomenon-could-send-natural-gas-prices-skyrocketing","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/fx\/2011\/10\/21\/little-known-phenomenon-could-send-natural-gas-prices-skyrocketing\/","title":{"rendered":"Little-Known Phenomenon Could Send Natural Gas Prices Skyrocketing"},"content":{"rendered":"

Little-Known Phenomenon Could Send Natural Gas Skyrocketing<\/a><\/p>\n

by David Fessler<\/a>, Investment U<\/em> Senior Analyst
\nThursday, October 20, 2011<\/p>\n

Every summer and fall, oil and gas drillers, producers and traders have one eye on what they’re doing and the other one on something even more important: the weather.<\/p>\n

They all know a major hurricane that tracks up through the Gulf of Mexico could have devastating effects on their operations.<\/p>\n

And they have have plenty of reason to worry. Take a look at the graph below produced from data from the National Hurricane Center. It shows the tracks of all the hurricanes that formed between 1851 and 2005.<\/p>\n

\"Hurricanes<\/p>\n

Plenty of them traversed the Gulf of Mexico, now a major offshore production region for oil and natural gas.<\/p>\n

The most devastating of those were Hurricane Andrew in 1992, Katrina in 2005 and Ike in 2008. Together, they caused an estimated $137.1 billion in damages. A lot of that damage was to oil and natural gas infrastructure.<\/p>\n

Hurricanes normally cause oil and natural gas production to be suspended until the weather system blows through. As a result, they all had an effect on the price of natural gas<\/a> and oil, regardless of the amount actual damage<\/p>\n

Higher Natural Gas Prices Coming? Depends on the Weather This Winter…<\/strong><\/p>\n

With the advent of more and more natural gas coming from onshore wells, the risks have shifted from summer hurricanes to winter chill. Let me explain.<\/p>\n

Few folks outside of the natural gas industry<\/a> are familiar with the term “wellhead freeze-off.” It happens when the outside temperature drops below freezing in the vicinity of the wellhead.<\/p>\n

At most natural gas wells, there’s a small amount of water that comes out of the ground along with the gas. If it’s below freezing, that water turns to ice inside the wellhead. If the cold snap persists long enough, it can completely shut off the flow of natural gas from the well.<\/p>\n

There are three ways to fix the problem:<\/p>\n