The State of Oil and Gas: December 19, 2016

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It’s the end of the day on December 1, 2016 and natural gas prices have broken $3.50/MCF.  Impressive.  I really hope that price holds.  We have cold weather coming up in the next few days, so it probably will.

A Reuters article says that a lot of U.S. producers can produce oil and make money below $40/bbl.  One area of the Bakken can even turn a profit at below $15/bbl!  Those are numbers that rival Middle Eastern numbers.  We may never see Saudi Arabia and OPEC power return, assuming we get more renewable energy sources built up in the next few decades.

For those interested in the environment, the natural gas industry is growing on pace to make it so that we will meet Paris accord emissions targets, even if Trump goes back on that agreement.  That’s naturally, market driven, with no regulations or government mandates required.  You could argue that coal regulations and renewables subsidies are forcing the market, but it appears that coal was already being phased out, and renewables are a pretty small part of the energy sector still.

Part of OPECs plan to cut 1.2 million barrels per day in production is to have non-OPEC countries also cut production by 600,000 barrels per day.  Russia may not play ball.  We’ll see what is said during the meeting on December 9.

A company called Blue Racer started shipping NLGs down the Ohio River to the Gulf Coast back in October.  That’s great news for West Virginia royalty and mineral owners, since it’s a way of getting product out of West Virginia (it comes from the Natrium plant on the WV side of the Ohio) to a new market.  The interesting thing about that is that not too long ago, there was a big stink about shipping produced water (water that comes back up the well after fracking) on the Ohio River, but there hasn’t been a peep about NGLs.  Seems like NGLs would be far worse to ship, but what do I know?

A Reuters article says that Vladimir Putin was involved in getting Saudi Arabia and Iran to work together for the recent production cut/freeze agreement.  If that’s the case, then it’s very likely that Russia will also cooperate.  What will other countries do?  If they all cooperate, then we could have a real production cut.  Good news for U.S. producers!

There’s a very good story at FinancialTimes.com that goes into some detail about how the production cut/freeze agreement came about.  It’s well worth the read.

There are some people out there saying that the production cut/freeze deal may succeed.  They base their argument mainly around the fact that OPEC and Russia both need higher prices.  OPEC didn’t expect the price of oil to fall as far as it did, and has been hemorrhaging money because of it.  So it seems like the main arguments for and against are:  It won’t succeed because all of the OPEC members cheat historically on these kinds of deals, and Russia’s oil production is partially privatized.  It will succeed because OPEC members all need a higher price for oil, Vladimir Putin will strong-arm his cronies, and the private side of Russian production needs high oil prices too.  It’ll be interesting to see what actually happens.

The cracker plant over in Ohio has reached another milestone.  The property has been cleared of the old industrial plant, ready for new construction.  The company has not come to a final decision, but since the cracker plant in Pennsylvania has been approved it’s expected that the Ohio one will be, too.  This is excellent news for us in West Virginia.  Greater demand for natural gas will increase the price, driving up royalty payments and bonus payments.  The more they want your mineral rights the better a deal you’ll be able to wrangle from them.  Too bad we can’t seem to make progress on the cracker plant in West Virginia.

December 12, 2016: Russia has agreed to participate in the oil production/freeze.  Oil prices have jumped $1.33 per barrel.

December 19, 2016.  Oil prices are at about $52/bbl, and natural gas prices are only at $3.40/MCF.  The natural gas price is surprising.  Considering the cold weather crossing the United States, I would have expected something closer to $3.75/MCF.  We’ll take a look at why in the next edition.

Another Pipeline Rupture: Ash Coulee Creek, ND

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A six-inch oil pipeline in North Dakota has sprung a leak.  The amount of oil spilled is unknown at this time.  The oil has entered Ash Coulee Creek, and the company, Belle Fourche Pipeline Company, has placed booms and a siphon dam across the creek to minimize future damage.

It’s surprising how often these leaks go unnoticed for long periods of time.  The companies promote their electronic sensors as safe and reliable, but well over half of all spills and leaks are discovered by people, not technology.  Even when they do get discovered, they sometimes don’t get fixed, such as this natural gas pipeline near Franklinville, New York.

Five days after the original news of the spill broke, it turns out the spill was over 176,000 gallons of crude.  That’s about 4,190 barrels.

West Virginia Oil and Gas Lease Basics

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DocumentIMPORTANT!:  The following article includes good advice about how to improve a “standard” oil and gas lease.  However, it is no substitute for hiring a lawyer to read the exact document you have and give you advice about the exact language of that document.  Even if you decide not to hire me, go find a lawyer that knows oil and gas leases.

With the price of oil and natural gas rising and, more importantly, with production numbers dropping and new pipelines getting ready to be built, leasing activity in West Virginia is going to see another uptick.  People who have never seen an oil and gas lease will be needing some advice.  The following is some good basic advice that everyone can benefit from.  Rising tides and all……

THE MONEY – The Only Thing You Think Matters

The first thing anyone thinks of, and the first thing any landman will discuss after establishing that you own the oil and gas, is money.  The landman will offer you a signing bonus.  The signing bonus is in exchange for the rights to develop the oil and gas for a certain number of years.

You can always get more than their first offer.  You don’t wear your best pair of shoes to get to the dance.  As a rule of thumb, you can usually expect to get double what their first offer is, unless it’s over about $2,000/acre or below $500/acre.  (Note: If the company you’re dealing with is trying to get a delay rental lease, the bonus is paid out in equal yearly amounts.  It’s a little harder to understand, but the landman should be able to explain to you the difference between what they’re doing and a “paid up” lease, including the possibility of having to pay some of it back to the company.  Yes, that’s often in delay rental leases.)  Don’t be shy when negotiating the bonus, because the bonus can be the only money that you ever get.  If the company never drills on the land there will never be any production and there will never be anything to pay royalties on.

That segues nicely into the next thing that everyone thinks about–the royalty.  The statutory minimum royalty in West Virginia is 1/8, or 12.5%.  Don’t settle for 1/8, though.  You can get almost always get 15%, and the huge majority of leases we have negotiated over the years have ended up at 18%.  If the company does drill and produce, getting a little more money for that production can be a nice thing.

Along the same line of thought, you’re going to want to get what’s called a gross proceeds lease.  The company is going to want to deduct some of the costs of transporting the gas from the well to wherever it gets sold, and as many other costs as it can.  In West Virginia, the company is responsible for those costs up until it sells the gas.  Don’t let them stick you with those costs.  Not only will you end up with more royalty money, you will also find it a lot easier to read and understand the data on the check stub.

LIABILITY – You Should End Up With None

The company is going to ask you to warrant the title to the oil and gas.  In other words, they want you to promise that you own the oil and gas.  If it turns out later that you don’t own the oil and gas, or that you own a smaller portion of it, then they will ask you to return money to them.  Even worse, they could ask you to fix the problems with the title.  That’s expensive.  Thousands of dollars worth of expensive.

You probably didn’t have any clue you owned oil and gas in West Virginia before the company told you so.  You are acting in reliance on the company’s research.  It doesn’t make sense for the company to turn around and ask you to warrant that the company’s work was done right.  Tell them you won’t warrant title.

Also, make sure that there isn’t anything in the lease about old wells or old leases.  It’s a pretty safe bet that there is an old well somewhere on that property, and there’s also a chance that there’s an old lease that could be affecting the property.

Finally, go ahead and ask them for an indemnification clause.  It’s not terribly likely that you’ll be liable for bad things that happen while the company is drilling.  They have deep pockets, you don’t.  They’re easy to find, you’re not.  They’re doing things on the property, you probably had to look up West Virginia on Google.  But it’s pretty easy to get and nice insurance to have, so ask.

LIMITED SCOPE – Oil and Gas Production Only

An oil and gas lease should be limited to just producing oil and gas.  Most of them aren’t.  Most of them include things like the right to convert it to gas storage, or the right to use the property for a disposal well.  Many of them also include the right to produce coal bed methane.

The main problem with most of these is that they don’t pay well.  At all.  They pay a few hundred dollars a year most of the time.  Even worse, they keep that lease alive longer than it should be.  In other words, you won’t be able to re-negotiate the terms of the lease or get a new signing bonus.

In the case of coal bed methane, the company you are dealing with doesn’t drill coal bed methane wells.  How do I know?  Because I’ve asked them.  The best case scenario for coal bed methane is that another company will approach the company that owns your lease and work out a signing bonus with them.  Once they drill and start producing they will send you royalties, but nothing more.

You should make sure the lease is only for the purpose of producing oil and gas and other products that might come out of the well with the oil and gas.

FINAL WORDS – It’s Complicated

There are a lot of other things that we help people with when it comes to oil and gas leases, including making sure they’re getting the most amount of money they can for the area their property is in.  What’s in this article is the basic stuff that can help you improve the standard boilerplate that the company will present to you.  It can make your lease…..palatable.

If you own the surface it becomes even more important that you get a good lawyer on your side.

We highly recommend you hire us to help you with your lease, even if it’s just a quick initial consultation.  You’ll leave with a lot more knowledge, confidence, and peace of mind than you came in with.

Give us a call at 304-473-1403 to schedule an appointment.  I promise we don’t bite.

The State of Oil and Gas, December 1, 2016

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The energy sector is cautiously confident, according to this article at Fortune.com.  The key phrase from a quote in the article is, “We’re beginning to put capital back to work…”.  That means investors are willing to put money into the industry.  That means that work will start to pick up, development will increase, jobs will be provided, hydrocarbons will be produced.  However, I’m even more glad that there is caution in the industry.  That means we may not see an extreme boom/bust cycle soon.  When things move slowly, people can plan for it and prepare for it.  You can plan for a career.  When things move fast, nobody benefits–even the money men lose sometimes, and that’s saying something.  Here’s to cautious confidence in the oil and gas industry.

The Wolfcamp formation in the Permian Basin in Texas is not new, but we now have some new data that shows it will be ridiculously prolific.  Here is a very short write-up about it.  It’s interesting to see how new technologies have changed the future of oil and gas production.  Previously, there were a lot of people who were worried about “peak oil”, the idea that the world was running out of oil to produce.  The theory said, in essence, that on a specific day (which varied according to who was doing the calculating) we would produce the most oil ever, and never be able to produce more.  It seems we have put off peak oil for quite a while.  New technology, namely horizontal fracking, did it.

Here’s an article from Japantoday.com that says Trump is unlikely to ban Saudi oil.  It gets into the history of OPEC for a while, but the practical reasons for not banning Saudi oil are interesting.

There is some slight chance that the next OPEC meeting in Vienna on November 30 could result in a production freeze or cut.  This article by Richard Zeits over at Seeking Alpha gets into some detail about it, but the short version is that all producers stand to benefit from increased prices.

While Donald Trump plans to make significant changes to the Clean Power Plan, there’s at least one energy company CEO who thinks it won’t make a difference.  Gerry Anderson of DTE Energy in Michigan says that DTE is making the change over from coal to natural gas (and renewables) regardless.  Anderson also says that he doesn’t know anybody who is building a new coal plant.  While this is great news for the northern part of West Virginia, the southern part of the state is still hurting badly from the loss of coal-related jobs.  Luckily, there are a couple of new metallurgical coal mines being opened up on the West Virginia/Virginia border.  If I were reliant on the coal industry for my livelihood, thought, I’d be figuring out how to make a change quick.

It’s November 29, the day before the next OPEC meeting.  Saudi Arabia has proposed a 4.5% cut for itself if Iran will freeze at 3.8 million barrels per day and if Russia will agree to cut production.  That’s a pretty aggressive stance, and Iran has unsurprisingly resisted that proposal, with oil prices falling over $1.50 per barrel on that news.  This article says that Saudi Arabian Energy Minister Khalid Al-Falih is setting the stage for failure because he doesn’t like Trump’s campaign promise to ban Saudi oil imports.  While Trump’s campaign promises are looking more like suggestions these days, it makes sense to set someone else up as the scapegoat.  However, when going in to negotiations you always set your expectations high, and that’s what Saudi Arabia has done.  Any cut/freeze combo right now would bring prices well up over $50/bbl for at least a few months.  Attacks on Nigerian pipelines have boosted prices this month, and Nigeria doesn’t provide a huge number of barrels to the world market.

The United States became a net exporter of natural gas in the last couple of months.  Most of the exports went through pipelines to Mexico and Canada, but some went overseas in the form of LNG from the Sabine Pass plant in Louisiana.  This shipment of LNG to China, for example.  Additional LNG plants are expected to come online in late 2017 and in 2018, so exports should continue to pick up.

Good news for the Marcellus/Utica area, but mostly the Ohio portion of it.  The REX pipeline is about to expand from 1.8 billion cubic feet per day to 2.6 billion cubic feet per day.  It won’t have a direct effect on West Virginia, but any added capacity from the area is better than none.

Japanese environmentalists are excited about increased fracking in America, and oppose nuclear power.  American environmentalists are pretty much the opposite.  Kind of interesting.

November 30, 2016: The early news is that OPEC has agreed to cut production by 1.2 million barrels per day. That is shocking, to say the least.  Oil prices are up by $3.30 already, and the day has hardly begun.  It will be interesting to see if the price continues to climb throughout the day, or if the markets will think that is enough of a jump.

The highest change that we saw today was $4.40/bbl.  Markets closed at $3.35/bbl higher than they had opened.  Seems $4.40 up was just a little too much for the markets.

December 1, 2016:  Oil is up another dollar and fifty cents this morning.  The price at my local gas station went up ten cents overnight.  As usual, gasoline prices go up a lot faster than they go down.

Some articles about the Wolfcamp formation have come out saying that it will be uneconomic to produce at current ($45/bbl) prices.  The numbers he used look conservative, as horizontal wells can and do regularly drain more acreage than he allows for.  However, his main point stands: the hydrocarbons are worth a lot of money, but nobody in the media took the time to figure out how much it would take to get out of the ground.

Great news for West Virginia mineral and royalty owners!  The price of natural gas is up over $3.40/MCF this morning!  Those are excellent, healthy numbers, and should result in a nice increase in royalty check numbers.

Since it’s the first of December, a quick look at the winter forecast is worth doing.  Pretty much everybody agrees that it’s likely to be a little colder than average in the north, and about average across most of the country, with the south above average.  Since the majority of natural gas use comes in the Northeast and Midwest, that should indicate that we’ll use up a lot of natural gas this winter.  We can expect higher natural gas prices because of that.  Natural gas prices probably won’t climb up to $4.00/MCF this winter, but I wouldn’t be too surprised to see them break $3.70/MCF or even $3.80/MCF for long periods.

Mountain Valley Pipeline: Close to Homes

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pipeline-pic-2The Roanoke Times has published numerous articles regarding the Mountain Valley Pipeline, both for and against.  Their latest article, by Duncan Evans, digs into the issue of the risk of having a pipeline close to a home, a school, or a building of any sort.

The article features a couple whose home is within 65 feet of the center line of the pipeline.  Can you imagine your house being that close to a 42 inch pipeline?  I can.  I have a client whose home is within 125 feet of the center line of the Atlantic Coast Pipeline.  When I walked from the house out to the pipeline location and turned around it was shocking.  It feels invasive.  It feels dangerous.  Regardless of how well engineered and well built the pipeline is, it would never feel completely comfortable.

That doesn’t take into account how disruptive the construction of the pipeline will be to those folks’ lives.

I’m no opponent of either pipeline project.  I see them as beneficial to West Virginia’s economy.  They’ll provide short term construction jobs and long term natural gas development and production jobs.  They’ll provide some nice tax dollars for a while, and some nice financial windfalls to surface owners.  They’ll provide a cleaner-burning fuel for power plants.

I am an opponent of putting pipelines too close to peoples’ houses.

 

Fracking Earthquake Study in Canada

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We’ve written about fracking and earthquakes before.  Now some Canadian scientists have gone and done a study of fracking and earthquakes, and determined that fracking causes earthquakes in certain places in the Great White North.

There are a couple of important points made in the article.

The first is that earthquakes have not been caused by fracking in the United States.  At least, not often.  I suspect that fracking has caused more earthquakes than the industry would like to admit.  However, the studies don’t appear to support a strong relationship between fracking and earthquakes.  Luckily, the earthquakes that do appear to be caused by fracking are small enough that they don’t typically do damage, and the huge majority of them aren’t even felt by anybody.  The recent earthquake in Cushing, Oklahoma was enough to do some damage, however, and may (or may not) have occurred because of fracking.  The trouble is, it’s almost impossible to determine whether fracking caused it.

The other point in the article is that the earthquakes were caused in two ways, “by increases in pressure as the fracking occurred, and, for a time after the process was completed, by pressure changes brought on by the lingering presence of fracking fluid.”

In other words, it was the change in pressure that triggered the earthquakes, not lubrication of a fault.  I had previously understood that lubrication could cause an earthquake, but this study throws serious doubt on that.

The article points out that different areas react differently.  Some places will have no fracking-induced earthquakes, others will, and some areas will have wastewater injection-induced earthquakes.  As usual, there is not one-size-fits-all answer here.  It seems that different geology leads to different results.

If you’d like to do some more reading about fracking-induced and injection-induced earthquakes, the USGS has a couple of  web pages on the subject.

The State of Oil and Gas, November 15, 2016

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Oil prices have been dropping, getting below $44/bbl at one point.  All because nobody believes OPEC will be able to put a production cut deal in place.

Donald Trump has won the Presidency, and nobody’s exactly sure what that’s going to do for oil prices.  This CNBC article throws out a few of the things that are going to factor in, such as a weakening dollar, better relations with Russia encouraging investment in Russian oil infrastructure, and Trump possibly re-instating the sanction on Iran.  Overall, the article thinks the price of oil will go down.

One source thinks that natural gas prices could rise above $25/MCF this winter.  The article doesn’t specify, but I suspect that’s the price to consumers, not the price at a hub.  Still, that’s considerably more than the current price to consumers.

Gas production for the United States as a whole dropped a lot in October.  The disappointing news is that the Marcellus/Utica region decreased production because it didn’t have anywhere to send the gas. This in spite of the Cheniere Energy gas-to-liquids plant in Louisiana ramping up.  Based off this article, we’d say that the southern part of the country is going to see higher natural gas prices, while the northern part of the country is going to see lower natural gas prices.

Deep sea rigs are being taken out of idle in a place called the Cromatry Firth, a natural deep harbor near the North Sea oil fields.  Since oil prices are down off their high of $52/bbl, it’s safe to assume that the oil industry foresees demand for oil increasing in the next year.  You don’t fire up deep sea rigs without a really good reason.

Oil prices have been as low as $42/bbl in the last few days, but are back at $45/bbl today, November 15, 2016.

The big news, of course, is yet to come.  Between now and our next update OPEC will meet and announce that it has not agreed to cut back or freeze production.  Kidding.  They surprised me last time with a framework for a deal.  Since then, of course, key players have walked back from that framework.  But the fact that they were able to get a framework in place makes one think that it’s possible they could get an actual agreement.  We’ll see.  I still think it’s highly unlikely.  Oil futures traders are hopeful, though.  That’s probably why oil prices are up to $45/bbl.

Hope everyone has a great Thanksgiving holiday next week!

What If We Ban OPEC Oil?

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One of Donald Trump’s promises during his campaign was that he would ban oil from all OPEC countries.

This article over at Alberta Oil Magazine discusses some of the implications of doing that.  It points out that we use about 20 million barrels a day, produce about 8.5 million right now, and produced about 9.4 million in 2015 and about 8.7 million in 2014.  We import only 3 million to 3.5 million barrels a day from OPEC countries.

Looking at the EIA reports, we get about four times as much oil from Canada as we do from Saudi Arabia, and almost as much from Mexico as we do from Saudi Arabia.  All told, though, we get about 1/3 of our imports from OPEC countries. We would have to make up that 3-3.5 million barrels a day from somewhere.

If we banned OPEC imports it’s almost certain that OPEC would pick up some customers that non-OPEC countries currently supply, just by cuthing prices.  Those non-OPEC countries would have some additional supply floating around, and would very likely just sell to the US.  Most of the difference we need would be made up from shuffling around suppliers and customers.

Some of the difference would probably be made up by Canadian tar sands, but the tar sand operations would probably take a while to bring production back up.  After the fires in Alberta earlier this year, the oil sands operations took a few weeks to bring back to full operations.  Opening up new areas would likely take a lot more than a few weeks.

Mexico would probably try to take up some of the slack as well, but most oil exploration outside the United States is the old style, requiring months to years to bring significant oil production online.

That’s assuming there will be slack in oil supplies.  Presumably, we would just start buying more oil from countries which already provide us oil.  Of course, there may be treaties and transportation issues that I don’t know about which would limit the amount of oil we could buy from non-OPEC countries.  If something, anything, gets in the way of our acquiring more oil from current non-OPEC sources, then the price of oil will certainly rise and production in the US will increase. Any kind of uncertainty will drive market prices up. 
Any real slack in oil supplies would be taken up by American companies, doing horizontal fracking.  The nice thing about a fracking operation is that it can be up and running in months, sometimes even weeks.  Areas like the Permian and the Bakken which have been heavily explored and leased would be able to bring new production online within months.  That’s not counting DUCs, drilled but uncompleted wells which just need to be fracked or turned in line (open the valves) to start producing.

There is one point about this entire thing that is worrisome for those of us in the Marcellus/Utica area.  Increased oil production brings increased natural gas production.  From the majority of oil wells there is some natural gas produced.  This natural gas isn’t just vented or burned onsite.  It’s sold into the pipeline system, and competes with gas produced elsewhere.  If we do see increased oil production in the US, the associated natural gas production will drive down prices and demand, even if slightly, for Marcellus/Utica gas.

Another Earthquake in Oklahoma

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There was a 5.0 earthquake near Cushing, Oklahoma.  There was some damage to downtown buildings.  No people were hurt, thankfully.

Of course, anyone who is involved in oil and gas or who is an environmentalist knows that the speculation will center around disposal wells being the cause.

Disposal wells are used to get rid of produced water, or the water that comes back out of a well after fracking and other stimulation processes.  Disposal wells have been used for almost as long as oil and gas production has been a thing.  Disposal has become a concern in recent years because horizontal fracking creates a lot more produced water than conventional processes ever did.  The theory is that injecting that much water into underground formations is lubricating fault lines, thus making it easier for earthquakes to occur, and also creating pressure imbalances that need to be released, thus making it more likely that an earthquake will occur.

So far, there is only a possible correlation, not an actual cause/effect relationship, between disposal wells and earthquakes.  The correlation is there, but it could just as easily be a coincidence.  Some things are going to be hard to prove, of course.  How do you prove exactly what’s going on thousands of feet underground?

Here in West Virginia, there’s a big water treatment plant being built.  It will handle a lot of produced water, so the produced water won’t have to be injected into the ground.  If disposal of produced water in injection wells is causing earthquakes, it will be less likely to happen here.

Interesting random fact: Cushing, OK is home to one of the largest oil hubs in the world.

The State of Oil and Gas, November 2, 2016

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Fracking companies have been increasing the length of the horizontal lateral in an attempt to increase efficiency; building one pad and using one hole to access more acres should be economically efficient.  However, a study by Bernstein Research shows that longer laterals are not necessarily more efficient.  The culprit is friction.  More pipe creates more resistance.  The result is a lower average peak rate, or put in other words, the highest amount of production you could expect from a well at it’s best is lower.

On the other hand, adding more sand (“proppant”, because it props the cracks open) to a well increases the production from the well.  That seems to be a pretty logical conclusion, since larger and (presumably) more cracks means more product can move through the formation to the well.  However, adding more proppant is a recent change.

Natural gas developers added 11 new rigs across the U.S. last week, which is a good thing at this point.  Production has been falling for a while, and new sources of production are needed to keep numbers up.  11 new rigs will probably not halt the falling production numbers, but will slow it.

Iraq is now saying it won’t cut production.  Just like that, oil prices fall.  We’re below $50/bbl again.  Now, Iraq could just be positioning for negotiation, or it could be serious.  Their excuse is that they need money to fight terrorists.  $50/bbl oil isn’t too bad for them right now, as they are still working to get production back up to pre-sanction levels.  So it’s hard to say what they will do at the next meeting.  Most experts expect Saudi Arabia to cut production anyways, so maybe Iraq will just continue to produce and take advantage of Saudi Arabia’s unilateral cuts.

Stephen Tindale is a former leader of Greenpeace, and he’s saying that fracking is an important technology, and should be encouraged.

On October 24, 2016, gas prices have dropped well below $3.00/MCF.  Last week saw warm, but not hot, weather.  This week is going to be quite cooler, so we should see a jump in prices before this gets published on November 1.

Costs for drilling gas wells are still dropping.  That means that even in a low price market it makes sense to keep drilling and producing gas.  That’s exactly what Antero is doing.  They have announced that instead of producing 1.75 billion cubic feet of gas per day during 2016, they are actually going to produce 1.8 billion cubic feet of gas per day.

It’s November 2, 2016, and oil prices and natural gas prices have fallen significantly since last month.  Oil prices have dropped for the same reasons they always do (supply/demand), but the details are unusual.  Essentially, there were a few weeks where there were drawdowns on oil storage, then all the oil that everyone expected to be there during those weeks suddenly showed up and we had the largest increase in oil storage in 34 years.  Also, the price of oil jumped when OPEC announced it would cut production, then dropped when Iraq announced it wouldn’t participate in the cut.  Is anybody really surprised by that?  The result of these factors was that prices dropped from over $50/bbl to around $45/bbl.  Regrading natural gas we have hit the “shoulder season”, the time between summer (storage) and winter (high use) where storage numbers always go up.  Temperatures were comfortable, so gas use was low, and traders for some reason decided to sell natural gas futures.  This Seeking Alpha article seems to think that traders overshot the fundamentals of the market, so the price will go back up.  Right now we’re at about $2.75/MCF.  Not horrible for gas production in West Virginia, but also not good.