Energy Prospectus

Natty Gas: Back from the Dead
By Christian DeHaemer

If we get a cold winter in the Northeast, like it is predicted, the price of natural gas could double like it did in 2014. Even if we don't get a cold winter, natural gas will go up anyway.

The oil research firm Platts is predicting that natural gas prices will go up for the simple reason that natural gas is an offshoot of fracking, and the rig count in the Northeast has collapsed.

Platt reports: "The rig count in the Northeast has collapsed as E&Ps focus on balance sheet demand and spend closer to internally generated cash flow. This will moderate Appalachian supply growth to roughly 2.3 Bcf/d in 2016 versus the 4 Bcf/d of annual average growth that we've seen over the last four years."

Companies in the natural gas space are severely undervalued after the long bear market. Any supply constraint and subsequent price jump will see shares go up as much as 500%.

Weather has a MAJOR impact on natural gas and propane prices because a high percentage of people burn them to heat their homes.

For the best winter forecast go to http://www.weatherbell.com/

If you live in Florida or along the eastern seaboard you need to listen to Joe Bastardi's weekend update. He is now expecting two more MAJOR storms to hit the U.S. before hurricane season is over. We could have a big storm as late as Thanksgiving. The big rain event that will hit Houston this weekend is part of the overall system that may generate several more big depressions over warm water.

Joe is also saying:
November will see above average temperatures through most of the U.S., but then it turns cold and wet.
> December: Cold with 50% of the U.S. probably having a White Christmas (normal is around 30%)
> January through March will be colder than normal with a lot more snow in SE quarter of the U.S. from Texas to NYC. Super El Ninos pump a lot of moisture into the southern jet stream. Several major winter storms will track from New Mexico, across Texas, across the South and up to NYC. NOTE THAT A LOT OF PEOPLE WHO HEAT THEIR HOMES WITH GAS LIVE IN THIS AREA.

"This will moderate Appalachian supply growth to roughly 2.3 Bcf/d in 2016"

I was hoping we would see decreases. The thought that the current low prices are still enough for depletion to beat exploration and development is very disconcerting. Who in their right mind is still drilling - unless there is sufficient ROI to had even at these prices. If prices were to say double to $3 in the east - would we see a complete deluge of supply?

Something does not seem right here.

U.S. natural gas production is falling by about 300,000 mcf per day each month. See: http://www.eia.gov/petroleum/drilling/#tabs-summary-2

Natural gas in storage is about 5% above the 5-year average (See: http://ir.eia.gov/ngs/ngs.html ), but keep in mind that we use a heck of a lot more gas now than we did five years ago. A colder than normal December should push natural gas over $3.00/mcf in the first quarter.