Higher Natural Gas prices this winter

[dan_s]

The Energy Information Administration (EIA) expects to see near-term declines in the amount of natural gas produced in the seven major shale regions for the first time in September. The number of new wells being brought on in every region will not be able to produce enough to offset the declines seen in legacy wells.

Read: http://www.oilandgas360.com/near-term-g ... f-26401157

As I have been forecasting for months now, the North American natural gas market is going to be much tighter this winter. Heading into 2016 natural gas production in the U.S. will be 3 BCF per day less than it was last year and demand will increase by about 3 BCF. This means there must be higher prices to encourage upstream companies to invest in the new wells. My SWAG is that Henry Hub gas will top $3.00 by the end of October and $3.50 by year-end. If we get a cold winter, we should see $4.00/mmbtu in the first quarter.

The only reason that gas in storage is near the 5-year average is because we've had a mild summer and no hurricane activity in the Gulf of Mexico.

This will benefit companies like RRC, GPOR, XEC, DVN, EOG, NFX, SM, GST and the upstream MLPs which produce a lot of gas.