At this price, most suppliers lose money.
Basic logic says that this imbalance can not sustain very long.
If NG price drops again, it will cause a lot of drillers simply to shut the valve. That will cause supply/demand to return to normal and will push the price up.
NG price will settle down at at least twice today's price, which is still well below 20 year average.
Currently, the oil and gas companies have not started new dry gas drilling programs after budgets were slashed 12 months ago continuing into 2013.
Recent public statements by the CEO's of EOG Resources and Ultra Petroleum say that "sustained" $5 natural gas prices are needed for new dry gas drilling budgets industry wide. Many of the higher cost producers are waiting for $6 natural gas.
Keep in mind that most companies can drill for either oil or gas and now most drilling budgets are focused on oil and liquids. While there is associated gas from oil/liquids drilling, it is only a fraction of the gas produced from the massive dry gas shale drilling in 2009 - 2011.
2013 will be a year when everyone understands how depletion impacts natural gas supply as reduced dry gas drilling and depletion takes it's toll on production.
While the EIA predicts flat gas production for 2013, we can easily see a 5% decline in production when December 2013 is compared with December 2012.
Producers stopped drilling and started flaring off excess supply last spring. It's a matter of how fast the existing wells decline from here. Much of the drilling boom of the past was financed with debt. When you read earnings reports lately, producers are trying to keep discretionary spending low and pay off debt with asset sales, reducing their interest expense. It is critical for them to get cash flow positive again. There are no signs of drilling picking up at these price levels. Until they start making money again like you say, whatever supply comes in will be secondary as a result of oil drilling. And honestly oil drilling may slow also.
Of course, the basic logic supports that arguement, but as you said, it's supply/demand. I think that the question that most on this board ask is where in the Supply/Demand curve does a customer say, I'm going to use coal or look for some other type of resouce instead. At $8, they'll make a profit, but their company may be a fraction of the size because people have switched to something else to use.