Natural Gas Storage Report - June 12

[dan_s]

Working gas in storage was 1,606 Bcf as of Friday, June 6, 2014, according to EIA estimates. This represents a net increase of 107 Bcf from the previous week. Stocks were 727 Bcf less than last year at this time and 877 Bcf below the 5-year average of 2,483 Bcf.

We will probably see one more build over 100 bcf next week (maybe two more). Then injections to storage will drop steadily as demand for gas for power generation picks up. Weekly injections dip to 40-60 bcf mid-summer.

5-year average is 3,853 bcf by mid-November to start the winter heating season. Draws from storage usually begin the 3rd week of November, so we have 23 weeks left to refill storage. We'd need to see average injections of 98 bcf to reach that level. It will not happen because injections will drop sharply in July & August.

Storage should be in the 3,300 to 3,500 bcf range when next winter begins. If it becomes clear we are heading to the low end of that range, gas prices will spike to over $6.00/mmbtu before Thanksgiving. Utilities will begin bidding up the price well before winter begins and speculators will jump in as well. NYMEX natural gas futures are up big today because this is all starting to sink in on Wall Street.

Hang tough, it is going to get very interesting in a few months.

[dan_s]

If you want to add more exposure to natural gas, my Top Picks are:

Unit Corp. (UNT)
Range Resources (RRC): Today's dip is a good buying opportunity on this "Core Holding" quality company.
Comstock Resources (CRK)
Cimarex Energy (XEC)
SM Energy (SM)
Devon Energy (DVN)
EOG Resources (EOG)
Gulfport Energy (GPOR)
Newfield Energy (NFX): See our recent profile under the Watch List Tab.