All of our "Gassers" would like to thank Mother Nature for gift of COLD weather.
See: https://markets.businessinsider.com/com ... -gas-price
A colder than normal December will probably push the price of the January NYMEX contract over $5.00/MMBtu. This is no longer just "wishful thinking". The "Bidding War" between the utility companies is just getting started.
It may take awhile for this to sink in for the Wall Street Gang, but their clients are asking them for their picks. Our favorite gassers (AR, GPOR, RRC and GDP) will show up on their lists.
Natural Gas Price is SURGING - Nov 14
Natural Gas Price is SURGING - Nov 14
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Natural Gas Price is SURGING - Nov 14
Including the storage report for the week ending November 9, 2018 the EIA will report 8 more storage reports before year-end.
> The last one will be for the week ending December 28, 2018.
> The 5-year average change in U.S. natural gas storage for the last 8 weeks of the year is -613 Bcf.
So, if we just have "average" draws from storage we will see storage at 2,595 Bcf on December 28, 2018. If the last three days of December are "average", another 50 Bcf will be taken from storage by December 31, 2018, leaving us with 2,545 Bcf in storage heading into the January, 2019.
Over the last eight years the previous year-end low for storage was 2,885 Bcf on December 31, 2013. We are on-track for the lowest amount of gas in storage heading into the winter heating season since 2005.
In January, 2014 the front month NYMEX contract (FEB 2014) spiked to $5.44 and natural gas prices averaged more than $4.00 for 2014.
So...
> We are on-track to end 2018 with storage 340 Bcf below the eight year low (2,885 - 2,545 = 340)
> Based on today's weather forecasts for the next few weeks, we may see draws from storage much larger than the 5-year average.
> This is why utilities will be taking the price of gas a lot higher.
Keep in mind that the U.S. has very little import capacity, so this is almost a closed market. The upstream companies can open the valves a bit, but there is not a lot they can do to increase production in the short-run. Plus, severe cold weather also impacts production and a lot of our gas comes from areas that do get periods of severe cold during the winter.
> The last one will be for the week ending December 28, 2018.
> The 5-year average change in U.S. natural gas storage for the last 8 weeks of the year is -613 Bcf.
So, if we just have "average" draws from storage we will see storage at 2,595 Bcf on December 28, 2018. If the last three days of December are "average", another 50 Bcf will be taken from storage by December 31, 2018, leaving us with 2,545 Bcf in storage heading into the January, 2019.
Over the last eight years the previous year-end low for storage was 2,885 Bcf on December 31, 2013. We are on-track for the lowest amount of gas in storage heading into the winter heating season since 2005.
In January, 2014 the front month NYMEX contract (FEB 2014) spiked to $5.44 and natural gas prices averaged more than $4.00 for 2014.
So...
> We are on-track to end 2018 with storage 340 Bcf below the eight year low (2,885 - 2,545 = 340)
> Based on today's weather forecasts for the next few weeks, we may see draws from storage much larger than the 5-year average.
> This is why utilities will be taking the price of gas a lot higher.
Keep in mind that the U.S. has very little import capacity, so this is almost a closed market. The upstream companies can open the valves a bit, but there is not a lot they can do to increase production in the short-run. Plus, severe cold weather also impacts production and a lot of our gas comes from areas that do get periods of severe cold during the winter.
Last edited by dan_s on Wed Nov 14, 2018 10:12 am, edited 1 time in total.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Natural Gas Price is SURGING - Nov 14
From: http://www.celsiusenergy.net/p/intraday-weather.html
"As of 9:00 AM ET on November 14, the population-weighted nationwide temperature is 38.7°F which is 2.5°F colder than yesterday and 10.0°F colder than the historical average. Accumulated Natural Gas-Weighted Degree Days (GWDDs) through 9:00 AM EDT tally 18.4 GWDDs which is 2.0 GWDDs greater than yesterday through the same time and 5.5 GWDDs greater than average. This suggests an above-average contribution of temperature to natural gas demand."
"As of 9:00 AM ET on November 14, the population-weighted nationwide temperature is 38.7°F which is 2.5°F colder than yesterday and 10.0°F colder than the historical average. Accumulated Natural Gas-Weighted Degree Days (GWDDs) through 9:00 AM EDT tally 18.4 GWDDs which is 2.0 GWDDs greater than yesterday through the same time and 5.5 GWDDs greater than average. This suggests an above-average contribution of temperature to natural gas demand."
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Natural Gas Price is SURGING - Nov 14
Read: https://www.forbes.com/sites/michaellyn ... d5d85d4509
"...long-term weather forecasts are imprecise and uncertain; should weather be colder than normal, the market is likely to tighten more, and prices could top $5/Mcf for an extended period."
This is the first article that I've seen which points out the refilling storage is not optional. If a colder than normal winter drains storage it can have a SIGNIFICANT impact on demand during the refill season (April to November), which can keep prices high all year.
"...long-term weather forecasts are imprecise and uncertain; should weather be colder than normal, the market is likely to tighten more, and prices could top $5/Mcf for an extended period."
This is the first article that I've seen which points out the refilling storage is not optional. If a colder than normal winter drains storage it can have a SIGNIFICANT impact on demand during the refill season (April to November), which can keep prices high all year.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Natural Gas Price is SURGING - Nov 14
Wall Street Journal: Natural Gas Is Getting More Expensive, and So Could Heating Bills
Investors are bracing for continued gains in natural-gas prices this winter—a development that could pinch U.S. consumers who use the fuel for home heating. A sudden change in weather forecasts has pushed natural-gas futures to $4.10 per million British thermal units, the highest level since November 2014. The rapid surge has rattled investors and traders, as the market goes into the winter heating season with less supplies in storage than any other year since 2005. Natural-gas prices have climbed 39% this year, and last week, they entered a bull market—defined as a 20% gain from a recent low. “The market has given us a glimpse of just how volatile it will be,” said James Stewart, vice president at Beeson & Associates, which specializes in commodity risk management. Traders largely expected record-high levels of natural-gas production would replenish stores for winter. However, demand has climbed outside of weather-related catalysts, going toward rising exports and as a substitute for other energy sources like coal. “There’s a more structural base to the demand equation than others think,” said Kyle Cooper, a consultant at ION Energy Group in Houston. That should lead to higher heating bills this winter, particularly if temperatures are colder than predicted.
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MY TAKE: FINALLY someone is starting to realize that demand for U.S. gas has exceeded supply all year.
Investors are bracing for continued gains in natural-gas prices this winter—a development that could pinch U.S. consumers who use the fuel for home heating. A sudden change in weather forecasts has pushed natural-gas futures to $4.10 per million British thermal units, the highest level since November 2014. The rapid surge has rattled investors and traders, as the market goes into the winter heating season with less supplies in storage than any other year since 2005. Natural-gas prices have climbed 39% this year, and last week, they entered a bull market—defined as a 20% gain from a recent low. “The market has given us a glimpse of just how volatile it will be,” said James Stewart, vice president at Beeson & Associates, which specializes in commodity risk management. Traders largely expected record-high levels of natural-gas production would replenish stores for winter. However, demand has climbed outside of weather-related catalysts, going toward rising exports and as a substitute for other energy sources like coal. “There’s a more structural base to the demand equation than others think,” said Kyle Cooper, a consultant at ION Energy Group in Houston. That should lead to higher heating bills this winter, particularly if temperatures are colder than predicted.
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MY TAKE: FINALLY someone is starting to realize that demand for U.S. gas has exceeded supply all year.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Natural Gas Price is SURGING - Nov 14
Watch today's update here: https://www.weatherbell.com/premium/
Listen carefully to what he is saying about Europe. In Europe a lot more homes and businesses burn oil for space heating. Therefore, a colder than normal winter in Europe will increase demand for oil.
Also, I believe our national weather service people are into Global Warming, Climate Change, etc. I think that their "belief" drifts into the weather forecasts. EIA and IEA employees also get their paychecks from people who are heavily invested in global warming theory. I'm just saying that most employees tend to deliver the stuff that their bosses want to see.
Maybe we should be paying more attention to that big bright spot that comes up in the east and sets in the west.
Read this: https://www.dailymail.co.uk/sciencetech ... warns.html
Listen carefully to what he is saying about Europe. In Europe a lot more homes and businesses burn oil for space heating. Therefore, a colder than normal winter in Europe will increase demand for oil.
Also, I believe our national weather service people are into Global Warming, Climate Change, etc. I think that their "belief" drifts into the weather forecasts. EIA and IEA employees also get their paychecks from people who are heavily invested in global warming theory. I'm just saying that most employees tend to deliver the stuff that their bosses want to see.
Maybe we should be paying more attention to that big bright spot that comes up in the east and sets in the west.
Read this: https://www.dailymail.co.uk/sciencetech ... warns.html
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Natural Gas Price is SURGING - Nov 14
And even with the NG price SURGING higher AR, GPOR and RRC all DOWN today. AR down over 6% right now. Unbelievable.
Re: Natural Gas Price is SURGING - Nov 14
AR being down makes some sense. As I have posted here many times, AR has more than 100% of its forecast gas production hedged at $3.50 through 2019. The "more than" is key. They will have to take a big mark-to-market writedown on their hedges in Q4. Just remember that the writedown is a non-cash item. In the long-run, higher gas prices will help them.
GPOR and RRC both have unhedged gas and should benefit from these higher prices.
All of the Sweet 16 produce come gas and some of them have very little of it hedged. We will be sending out an updated profile on Cimarex Energy (XEC) today. Take a hard look at their production mix.
GPOR and RRC both have unhedged gas and should benefit from these higher prices.
All of the Sweet 16 produce come gas and some of them have very little of it hedged. We will be sending out an updated profile on Cimarex Energy (XEC) today. Take a hard look at their production mix.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Natural Gas Price is SURGING - Nov 14
Does the "more than" also mean that they have to acquire spot gas - say at $4.50 to sell at $3.50 - in order to fulfill their obligations? If so it didn't seem to have helped them in the past when spot was much lower than the hedged price.
Thanks Dan.
Thanks Dan.
Re: Natural Gas Price is SURGING - Nov 14
All of Antero's physical production is sold into the physical market at prevailing prices.
Hedges are like Puts and Calls. They are paper transactions based on index prices. So, Antero will get paid cash for the amount of hedged gas in October because the index price was below the $3.50 price on their hedges. Antero will have to pay cash to the counter-parties in November and December for the hedged volumes because the index price will average above $3.50.
To answer your question directly, no they will not have to go into the physical market to buy natural gas to settle the hedges.
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Natural gas prices are set in regional markets. There is now a very good chance, thanks to Mother Nature, that gas prices the Northeast Region go very high this winter. Antero, Gulfport and Range all sell most of their gas into that region.
Hedges are like Puts and Calls. They are paper transactions based on index prices. So, Antero will get paid cash for the amount of hedged gas in October because the index price was below the $3.50 price on their hedges. Antero will have to pay cash to the counter-parties in November and December for the hedged volumes because the index price will average above $3.50.
To answer your question directly, no they will not have to go into the physical market to buy natural gas to settle the hedges.
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Natural gas prices are set in regional markets. There is now a very good chance, thanks to Mother Nature, that gas prices the Northeast Region go very high this winter. Antero, Gulfport and Range all sell most of their gas into that region.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group