Dan - any thoughts on the rise in nat gas prices? Do you think the market is starting to see your end of year scenario?
Bob
Nat Gas Price
Re: Nat Gas Price
What most people do not understand is that crude oil and natural gas really are two totally different markets now. Oil trades on the global market and natural gas trades on regional markets. The U.S. gas market has very little export capacity until LNG exports ramp up next year.
Traders pay little attention to natural gas during the 2nd quarter. If we have a hot summer, you see some attention in the 3rd quarter when demand spikes for power generation. However, it has been a mild summer and July is expected to remain cooler than normal. Of course, "cooler" is a relative term. My AC in Houston seems to run all the time. Keep in mind that most of the gas fired "peaking plants" that fire up in the summer are in the SE quarter of the U.S., so it really makes little difference if it is cool in the NE.
Our friend Dr. Joe Bastardi is forecasting a cold start to the winter with colder than normal October & November. There is a very strong El Nino this year. Joe is expecting a mild December and he has yet to release his "official" winter forecast. A cold start to winter will probably push gas well over $3.00/mcf. $3.50/mcf by Thanksgiving would be very nice.
There is a link to Joe Bastardi's weekend updates on the bottom of the EPG home page.
I am going to discuss natural gas at our luncheon on Tuesday. Here is a preview:
My SWAG
U.S. gas production will be down ~3.0 Bcf per day in the 4th quarter YOY
U.S gas demand will increase in 2016 (based on report from Simmons & Company Research team in Houston)
+1.8 Bcfpd for exports, primarily LNG
+0.9 Bcfpd for power generation, primarily because of coal fired plant shutdowns
+0.6 Bcfpd for industrial demand
If I am right, natural gas should be over $4.00/mcf in 2016.
Traders pay little attention to natural gas during the 2nd quarter. If we have a hot summer, you see some attention in the 3rd quarter when demand spikes for power generation. However, it has been a mild summer and July is expected to remain cooler than normal. Of course, "cooler" is a relative term. My AC in Houston seems to run all the time. Keep in mind that most of the gas fired "peaking plants" that fire up in the summer are in the SE quarter of the U.S., so it really makes little difference if it is cool in the NE.
Our friend Dr. Joe Bastardi is forecasting a cold start to the winter with colder than normal October & November. There is a very strong El Nino this year. Joe is expecting a mild December and he has yet to release his "official" winter forecast. A cold start to winter will probably push gas well over $3.00/mcf. $3.50/mcf by Thanksgiving would be very nice.
There is a link to Joe Bastardi's weekend updates on the bottom of the EPG home page.
I am going to discuss natural gas at our luncheon on Tuesday. Here is a preview:
My SWAG
U.S. gas production will be down ~3.0 Bcf per day in the 4th quarter YOY
U.S gas demand will increase in 2016 (based on report from Simmons & Company Research team in Houston)
+1.8 Bcfpd for exports, primarily LNG
+0.9 Bcfpd for power generation, primarily because of coal fired plant shutdowns
+0.6 Bcfpd for industrial demand
If I am right, natural gas should be over $4.00/mcf in 2016.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Nat Gas Price
If I am right about natural gas prices moving higher, Gastar Exploration (GST) should double in six months.
Sweet 16 with a lot of exposure to gas are: GPOR, RRC, XEC, DVN, EOG, NFX and SM. SM may get the most bang from a move in Ngas prices because it is so grossly oversold.
All of our model portfolio companies do have some exposure to Ngas prices.
Sweet 16 with a lot of exposure to gas are: GPOR, RRC, XEC, DVN, EOG, NFX and SM. SM may get the most bang from a move in Ngas prices because it is so grossly oversold.
All of our model portfolio companies do have some exposure to Ngas prices.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group