Natural Gas Trades Below the Marginal Cost of Production, Becomes Interesting

June 13, 2012

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It’s often best to start looking at commodities when they are trading below their marginal cost of production. One can operate unprofitably only so long.

Natural gas is trading at levels well below the marginal cost of production of traditional extraction, and beneath the cost of extraction for most shale gas fields as well. “Something has to give – either gas prices rise or ‘full cycle’ costs need to be lower,”says Peters & Co.

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Shale gas fields exhaust rather quickly, a misunderstood phenomenon Wilbur Ross mentioned in a recent interview.

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Source: Peters & Co, AgCapita

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