Rapid growth in US natural gas production was underwritten by high yield debt markets which are now generally shut.
As the gas price fell to record lows, production growth transitioned to associated gas from booming oil shale. Subsequent to the oil price shock, new associated gas development has collapsed.
The industry has reached the stabilisation phase where production declines are now set to accelerate whilst demand growth is underwritten by US power generation and exports.
We have positioned our investment portfolios to benefit from a strong rebound in the US natural gas price to around $4.50/MMBtu, the cost of marginal supply, a rare case of a commodity price outcome largely not dependent on Chinese demand.