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Natural gas prices increased 39% from a 6 1⁄2-year low of $3.19/MMBtu on April 27, 2009, to $4.42 on May 13. Some think that the worst of the price collapse that began in July 2008 is over and that gas prices will return to normal. I do not believe that is the case, although I hope I am wrong. Chesapeake Energy proclaimed in a recent investor presentation that “the fix is under way,” and that natural gas prices will soon return to $7−8/Mcf. Chesapeake and other companies make the case that prices will rebound because of the drastic decrease in drilling. The gas-directed rig count has fallen from 1,606 to 728 since September 2008 and, because about 1,100 rigs are needed to maintain supply, we are creating a deficit that should cause the price to rise.
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