Energy Prospectus

VERY BULLISH

Per EIA: Working gas in storage was 2,273 Bcf as of Friday, July 20, 2018, according to EIA estimates. This represents a net increase of 24 Bcf from the previous week. Stocks were 705 Bcf less than last year at this time and 557 Bcf below the five-year average of 2,830 Bcf. At 2,273 Bcf, total working gas is within the five-year historical range. < Scraping the bottom of the 5-year range.

My previous forecast that storage would be ~450 Bcf below the 5-year average on August 31st (just six storage reports away) is now looking way to conservative.

Just in the last three weeks, the deficit to the 5-year average has GROWN by 56 Bcf.

We are now down to 16 weeks before the next winter heading season begins. Weekly builds would need to average 34.8 Bcf higher than the 5-year average to get back to the 5-year average storage level by mid-November. In my opinion, there is now ZERO chance of that happening.

I went back and looked at my spreadsheet. Since mid-April (13 weeks or 1/4 of a year) the deficit to the 5-year average storage level has GROWN by 97 Bcf. IMO this is a clear indication that demand for U.S. natural gas has grown faster than supply.

There is no debate that U.S. natural gas supply has grown a lot, but EIA and many other analysts seem to be ignoring demand growth. Demand has accelerated for power generation, exports and industrial demand for feedstock & fuel.

I now think the probability of ngas storage being 500 Bcf below the 5-year average after Labor Day is higher than 50%. The HEAT in Texas and the West Coast is burning up a lot of gas for power generation. Based on my own electric bill, those of us in the Houston area are contributing to the demand growth.

I also believe that EIA expected more associated gas from the Permian Basin to be online by now.

HISTORICALLY, this situation has caused natural gas price spikes in Q4 as the utilities ramp up bids in the spot market. Utilities must have enough gas supply to meet demand for space heating in their areas. They are required by law to maintain pressure in the natural gas lines that come to your home.