Energy Prospectus

Working gas in storage was 2,816 Bcf as of Friday, June 23, 2017, according to EIA estimates. This represents a net increase of 46 Bcf from the previous week. Stocks were 319 Bcf less than last year at this time and 181 Bcf above the five-year average of 2,635 Bcf. At 2,816 Bcf, total working gas is within the five-year historical range.

5-year average build for this week is 72 Bcf. This is a very bullish trend, considering how mild the weather has been.

Over the last 15 weeks the delta to the 5-year average storage level has declined by 233 Bcf.

Draws from storage are becoming likely in late July and August. HOT weather in July and August will increase natural gas demand by 10-15 Bcf per day.

Partial explanation for the small build is GOM shut-ins for Cindy. Probably less than 5 bcf.

Despite very mild weather in May and June, over the last eight weeks, the difference between the natural gas storage level and the 5-year average has declined by 125 Bcf or over 2.2 Bcf per day. If we stay on this trend, storage will go below the 5-year average in 82 days or sometime in September. I've been predicting that this would happen in my weekly podcasts for several months.

My guess is that HOT weather in July and August will speed up the decline in storage level. More tropical storm activity in the GOM will also have an impact.

If natural gas storage level goes below the 5-year average in September, the utilities will bid up the gas price. They must build up storage levels before the beginning of winter heating season.

Credit Suisse is forecasting that natural gas at Henry Hub will average $3.75/MMBtu in Q3.

AR, EQT, GPOR and RRC are very cheap if you agree with me on where this is heading.

Remember, the U.S. has HUGE proven reserves of natural gas. BUT .... reserves in the ground are not "production capacity". Over the next six months, U.S. "production capacity" is much lower than demand for natural gas.