The US benchmark for natural gas has collapsed dramatically, ending the year as the worst-performing commodity index because of a glut of domestic shale gas.
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In yesterday's trading, the Nymex Natural Gas Index was down 40.83 per cent on its value at the beginning of the year.
In what has become known as the shale gas revolution, new extraction techniques have opened up vast deposits of natural gas trapped in previously inaccessible rock formations. This has turned the US from a net importer of gas to a country that is gearing up for exports and is looking to grow its petrochemical industry.
Some experts suggest gas prices will rise in the future as the economy recovers and exploration shifts away from gas to shale oil, the production of which is becoming commercially viable as international crude prices have remained high on the back of tight supply.
But the US energy department has forecast another drop in prices next year, leading to an unprecedented fifth consecutive yearly decline.
The gas Nymex could tumble another 8.2 per cent from this year's average next year, as supply increases by a further 2.8 per cent to 67.72 billion cubic feet a day, according to the department. Demand will climb by only 1.8 per cent.
Gas at the Henry Hub in Erath, Louisiana, the delivery point for New York futures contracts, will slip to US$3.70 per million British thermal units (Btu) next year, the energy department said this month. Spot prices for the current year averaged $4.05 per million Btu.
The department's view is supported by a string of market outlooks.
Citigroup has also cut its forecast for the average natural gas price next year from as high as $4.10 to $3.30, citing production growth and record inventories.
Shale gas production has more than doubled between 2007 and 2009, according to the most recent energy department data. Production will continue to grow, says Barclays Capital.
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