After listening to several people call Hurricane Ike lackluster, I had a feeling that more than two million families between Galveston and Houston sitting in the dark would disagree.

The extensive damage caused by the storm, however, didn't extend to the offshore oil and gas rigs in the Gulf of Mexico. And despite the slight amount of damage, the infrastructure came through without any major problems. If you recall from last week, approximately 79% of oil production and 70% of natural gas production was shut-in. By the time Ike made its assault on land, the Minerals Management Service reported that 99.6% of oil production and 91.9% of natural gas remained shut-in as of Sunday.

Now that Ike has fizzled into a tropical depression on it's way for Canada, we can expect those Gulf of Mexico operations to start back up soon. In fact, several oil companies have already resumed production.

Even though natural gas production in the Gulf of Mexico makes up about 14%, the storm hardly had an effect on prices, which are up a mere 1.7% since last week.

The question is, where are prices headed from here on out?

Considering oil is now treading water just below $100 per barrel, most people would expect natural gas to follow suit. After all, natural gas prices have fallen right alongside oil. While the public has clearly shown its outrage for higher oil prices by cutting back on gasoline demand, natural gas demand is still growing.

Reaching a Natural Gas Bottom

I don't think the question is whether or not natural gas prices will rise, but rather how soon.

Let's take a quick look at the numbers.

In their latest Short Term Energy Outlook, the EIA reported they expect overall natural gas consumption to grow by 2.7% in 2008, followed by 2.2% increase in 2009. Traditionally, September is the month when U.S. natural gas consumption is at its lowest. During the next three months, we can assume consumption is going to pick up and reaching a peak level in January, 2009. Even though storage levels have been increasing, natural gas stocks are still 146 billion cubic feet less than a year ago.

Natural gas production is a much different story.

Unlike our domestic oil production, which peaked over three decades ago, natural gas is enjoying a boom. The EIA reported that production this year has grown by nearly 8%. Producers are more than making up for the natural decline rates.

So what's the problem?

There's a concern that this jump in production will cause a supply glut in natural gas. As you know, unconventional plays makes up over 40% of our natural gas production. Areas like the Barnett shale in Texas have grown considerably over the last few years, mostly due to new drilling techniques.

I wouldn't jump right away and worry about a supply glut. Although the success at the Barnett shale has generated a buzz for shale plays across the U.S., production from the area may peak as early as next year. In other words, developing new deposits will be crucial to keeping up with demand.

The Haynesville Shale Natural Gas Play

A few years ago I was asked, "Where do you think will be the next big thing for natural gas?" It was a simple question.

At the time, my answer was to take a closer look into the Barnett shale. Specifically, find the drillers that know what they're doing. Tapping into these resources is neither easy, nor cheap. In order to extract the natural gas, companies need to drill horizontal wells and fracture the shales.

Recently, I was asked the exact same question. This time, however, my answer was the Haynesville Shale play in northwest Louisiana. The Haynesville shale could potentially be one of the largest natural gas fields in the U.S.

As far as players in the Haynesville shale, I prefer to focus my attention on the producers with experience in these plays. Take Chesapeake Energy (NYSE: CHK), for example. The company has dipped their hands in some of the best shale plays in the country. Not only has Chesapeake been evaluating the Haynesville for the last two years, but the company has a stake in 480,000 net acres in the play.

Even though Chesapeake has received much of the attention in the Haynesville shale, they aren't the only company around. On Friday, I'll give you some of my favorite shale plays across the U.S.

Until Next time,

Keith Kohl