Watch Joe Bastardi's Monday update here https://www.weatherbell.com/premium/
"This will be the coldest November since 2014".
Joe highlights his updated winter forecast, which is extremely bullish for natural gas and propane prices.
He sees the chance of a MAJOR WINTER STORM hitting the Northeast next week. If the next two weeks play out as the weather forecast models are now predicting, we could see the December NYMEX contract for natural gas move over $4.00 by the end of November. The Dec contract is trading at $3.55 as I type this.
If you watch his Saturday Summary, Joe is expecting a brief warm up late in November and then a very cold December.
The Wall Street Gang has two concepts that need "adjustment".
1. They believe an El Nino in the Central Pacific always causes a mild winter in the U.S. That is not true. Mild El Ninos (like the one we have now) have generated some of the coldest and snowiest winters we have ever had.
2. Wall Street believes at we have massive natural gas reserves in the U.S. that will keep gas prices depressed forever. Yes, we do have massive gas reserves, but reserves in the ground are not the same as production capacity. Demand for U.S. natural gas has exceeded supply of U.S. natural gas this year, which is why we are entering the winter heating season with a HUGE SHORTAGE of gas in storage. There is more supply coming on-line, but there is even more demand coming in 2019 (LNG exports and pipelines to Mexico).
Read this carefully: https://seekingalpha.com/article/421397 ... 19?page=16
I will open both of our luncheons this week with an update on the U.S. natural gas market.
Dallas on Wednesday, Nov. 7
Houston on Tuesday, Nov 8
Why natural gas price is LIKELY to be over $4 soon
Why natural gas price is LIKELY to be over $4 soon
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Why natural gas price is LIKELY to be over $4 soon
Nice call on Natural gas. I realize you have been touting it for sometime but it takes the experts awhile to catch up.Or maybe Wall Street had to get their ducks in a row to maximize their profits. Am I insinuating the game maybe rigged...or slightly slanted. No way. Anyway,thanks for your insight.
Re: Why natural gas price is LIKELY to be over $4 soon
I have been doing this for four decades. The Wall Street Gang is primarily a group of very young people that have little or no industry experience. You might have noticed that my stock valuations are fairly close to what the senior analysts (the few who do know the industry) have for their price targets. The problem is that the BIG MONEY is now managed by young folks that do not like hydrocarbon based energy and/or they believe that everyone will soon be driving a Tesla. What's funny (to me) is that 85% of the electricity to charge up those EV's will be generated in power plants that burn coal and natural gas. Plus, EV's will only have a minor impact on demand for oil until the middle of the next decade.
Another point that I have been trying to pound into this group: The Wall Street Gang never even looks at natural gas until after Labor Day. It has been worse this year because they have been drinking the EIA's "cool-aid" that we are swimming in a surplus of natural gas supply. It seemed that no one even noticed that demand for U.S. natural gas (the cheapest energy on the planet) has been exceeding supply all year. Why else has U.S. natural gas in storage been falling further and further behind the 5-year average? One of my favorite sayings it that "when the debits don't equal the credits it is telling us something".
If November and December are colder than normal (we are off to a cold start), we may see the "Mother of all Bidding Wars" for natural gas in the Henry Hub Spot Market within 60 days. It is definitely going to be a very interesting run into year-end.
TO BE CRYSTAL CLEAR: This price spike in natural gas will only last beyond the first quarter if we get a normal winter that drains storage below 1,200 Bcf (or close to it) by April, 2019. If that happens, demand to refill storage will wipe out all of the surplus gas that EIA and many of the "experts" say we are going to have next year. BTW Raymond James increased their natural gas price forecast for 2019 by 50 cents/mcf this morning.
If Joe Bastardi's winter forecast is close to what happens, there will be regional gas shortages in the eastern half of the U.S. that will draw a lot of attention to this sub-sector. If Joe is right, U.S. natural gas in storage will drop below a TCF for the first time since March, 2014. 2014 was the last time that natural gas was over $5.00/mcf and averaged more than $4.00 for the entire year.
Another point that I have been trying to pound into this group: The Wall Street Gang never even looks at natural gas until after Labor Day. It has been worse this year because they have been drinking the EIA's "cool-aid" that we are swimming in a surplus of natural gas supply. It seemed that no one even noticed that demand for U.S. natural gas (the cheapest energy on the planet) has been exceeding supply all year. Why else has U.S. natural gas in storage been falling further and further behind the 5-year average? One of my favorite sayings it that "when the debits don't equal the credits it is telling us something".
If November and December are colder than normal (we are off to a cold start), we may see the "Mother of all Bidding Wars" for natural gas in the Henry Hub Spot Market within 60 days. It is definitely going to be a very interesting run into year-end.
TO BE CRYSTAL CLEAR: This price spike in natural gas will only last beyond the first quarter if we get a normal winter that drains storage below 1,200 Bcf (or close to it) by April, 2019. If that happens, demand to refill storage will wipe out all of the surplus gas that EIA and many of the "experts" say we are going to have next year. BTW Raymond James increased their natural gas price forecast for 2019 by 50 cents/mcf this morning.
If Joe Bastardi's winter forecast is close to what happens, there will be regional gas shortages in the eastern half of the U.S. that will draw a lot of attention to this sub-sector. If Joe is right, U.S. natural gas in storage will drop below a TCF for the first time since March, 2014. 2014 was the last time that natural gas was over $5.00/mcf and averaged more than $4.00 for the entire year.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Why natural gas price is LIKELY to be over $4 soon
"The price of natural gas surged 8% in early-morning trading on Monday after weather forecasters said that a blast of cold air would hit the U.S. this week. The cooler temperatures will likely bring rain and snow across much of the Great Plains and Midwest before they head east. That cold front will likely fuel greater demand for natural gas to heat homes, which is why its price is on fire today. The potential for an uptick in demand and pricing is excellent news for Gulfport Energy (GPOR), since natural gas accounted for 89% of the company's production last quarter."
Read: https://finance.yahoo.com/news/why-gulf ... 00260.html
Read: https://finance.yahoo.com/news/why-gulf ... 00260.html
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Why natural gas price is LIKELY to be over $4 soon
All of the upstream companies in our Sweet 16 and Small-Cap Growth Portfolio produce a combination of crude oil, natural gas and NGLs. You can find their production mix at the bottom of the forecast/valuation models on our website. The amount of oil and gas that they have hedged is also shown at the bottom of each forecast.
Learning to use the macro-driven forecast models on our website is the best way to get value from an EPG membership.
Learning to use the macro-driven forecast models on our website is the best way to get value from an EPG membership.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Why natural gas price is LIKELY to be over $4 soon
BMO Commodity Markets:
Natural Gas
The cold that had been creeping into the mid-day runs late last week was confirmed and amplified over the weekend, sending the front end of the market substantially higher. The rally, as we have been discussing, was mainly spread driven as Dec was up .28 with Oct19 up .02. Cal 19 managed to move .06 on average with Cal20 the weakest part of the curve settling flat to Friday’s levels. An early cold like this will spell trouble for the market later this winter when absolute temperatures could be much colder, causing demand spikes and freeze-offs simultaneously in the East. The market is less concerned heading into the summer with continued production increases and a tough comp y/o/y as far as demand is concerned. A persistently cold winter could change that dramatically, but the market is content for now to push that problem down the road and focus on the near term. As expected, vol rallied sharply in Dec-March, up 4.5% on average for ATM and call skew steepening by about 1.5% as well for the period.
Natural Gas
The cold that had been creeping into the mid-day runs late last week was confirmed and amplified over the weekend, sending the front end of the market substantially higher. The rally, as we have been discussing, was mainly spread driven as Dec was up .28 with Oct19 up .02. Cal 19 managed to move .06 on average with Cal20 the weakest part of the curve settling flat to Friday’s levels. An early cold like this will spell trouble for the market later this winter when absolute temperatures could be much colder, causing demand spikes and freeze-offs simultaneously in the East. The market is less concerned heading into the summer with continued production increases and a tough comp y/o/y as far as demand is concerned. A persistently cold winter could change that dramatically, but the market is content for now to push that problem down the road and focus on the near term. As expected, vol rallied sharply in Dec-March, up 4.5% on average for ATM and call skew steepening by about 1.5% as well for the period.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group