Shale gas production is expanding continually and will grow to 12.2 trillion cubic feet a year by 2035, making up 47 percent of total output compared with just 16 percent in 2009, the Energy Department estimated in the Annual Energy Outlook report released on April 26.

Gas stockpiles dropped 102 billion cubic feet, or 2.7 percent, in the week ended Dec. 9 to 3.729 trillion cubic feet, the department reported on Dec. 15. The decrease was smaller than the five-year average drop for the week of 142 billion cubic feet, department data show. Inventories are still near the record of 3.852 trillion cubic feet in the week ended Nov. 18.

“Gas is one of the few commodity markets that has had a very good trend, which is downward,” said Teri Viswanath, a Houston-based analyst at BNP Paribas SA. “If there is any holiday cheer, it's the fact that gas prices have done what they ought to.”

Eoin Treacy's view Natural gas prices remain in a consistent, albeit increasingly oversold downtrend and dropped below the 2010 low last week. A sustained move above $3.70 would be required to break the six-month progression of lower rally highs and suggest a return to medium-term demand dominance.

Natural gas is one of the only commodities to have fallen back into its long-term base. This is in part because of the slow growth environment prevalent in the US economy and also because supply is rapidly increasing as a result of unconventional production. $3 is uneconomic for most unconventional producers so it is reasonable to expect drilling to decrease over time as the relative attractiveness of drilling for oil continues to improve.

When prices for an essential commodity deteriorate, the argument for adopting that fuel is more compelling. In addition consumers think of new applications for the commodity in an effort to avail of more attractive pricing. This generally leads to demand growth and eventually helps form the basis of a future bull market. At present, there is little sign that new uses for natural gas have evolved to a meaningful level.