Energy Prospectus

Working gas in storage was 1,817 Bcf as of Friday, June 1, 2018, according to EIA estimates. This represents a net increase of 92 Bcf from the previous week. Stocks were 799 Bcf less than last year at this time and 512 Bcf below the five-year average of 2,329 Bcf. At 1,817 Bcf, total working gas is within the five-year historical range. < Very close to the bottom of the 5-year range.

To safely make it through a COLD WINTER the U.S. needs ~4,200 Bcf in storage by Mid-November.

So............ the gap between the storage level and the 5-year average is getting LARGER. EIA keeps telling us that a SURGE in gas supply is coming, but SO FAR it has not shown up.

Why??????? because demand for gas has increased as fast or even faster than supply.

For three straight weeks and 11 of the last 13 weeks the change in gas storage has been less than the 5-year average. In fact, over the last 13 weeks (25% of a year) the delta to the 5-year average change in storage has been -297 Bcf. < That is a BIG difference.

The U.S. has MASSIVE natural gas reserves in the ground. But "reserves" and "production capacity" are two totally different things. For the last 13 weeks, thanks primarily to a cold April and hot May, production capacity has been below the 5-year average demand for this time of year.

If storage is 400 Bcf below the 5-year average at the end of June (now a HIGH probability), then I think we will see ngas prices over $3.50/MMBtu later this year. Right now, the December NYMEX contract for HH gas is trading at $3.09/MMBtu.

"As of 11:00 AM ET on June 7, the population-weighted nationwide temperature is 74.3°F which is 1.2°F warmer than yesterday and 2.2°F warmer than the historical average. Accumulated Natural Gas-Weighted Degree Days (GWDDs) through 11:00 AM EDT tally 4.0 GWDDs which is 0.7 GWDDs less than yesterday through the same time but 2.9 GWDDs greater than average. This suggests an above-average contribution of temperature to natural gas demand." - http://www.celsiusenergy.net/p/intraday-weather.html

Unless U.S. weather turns much cooler than it is now, natural gas in storage will be MORE THAN 500 Bcf below the 5-year average at the end of June. This is extremely bullish for the natural gas price in the near-term. I want to be CRYSTAL CLEAR: This is a short-term trading opportunity (probably) because there is a lot more takeaway capacity coming to the Marcellus/Utica later this year. The "wild card" may be the slower growth of pipeline capacity being added in West Texas for gas.

Demand for midstream services (gathering, processing, transportation and storage) is extremely HIGH for liquids & gas and there is nothing on the horizon that should change that. This is why I am focusing on some of the best midstream companies in our High Yield Income Portfolio. I am finishing up MMP today.

One of our members just emailed me a chart that shows that for the week ending June 1st, demand for gas just for power generation and industrial demand is was up 69.3 Bcf or close to 10 Bcf per day year-over-year. This does not include LNG and other exports, which we know are up for sure.

Per EIA, U.S. gas production is up ~7 Bcf per day to ~82 Bcf per day.