Energy Prospectus

Working gas in storage was 2,754 Bcf as of Friday, May 13, 2016, according to EIA estimates. This represents a net increase of 73 Bcf from the previous week. Stocks were 791 Bcf higher than last year at this time and 795 Bcf above the five-year average of 1,959 Bcf. At 2,754 Bcf, total working gas is above the five-year historical range.

This is slightly bullish because the normal storage builds from mid-May to mid-June are 90-100 bcf.

From a recent piece in Investing Daily by Robert Rapier (now an EPG member):
"...natural gas prices under $2.50 per million British thermal units (MMBtu) aren't sustainable either. In fact, since 2000 the price of natural gas has breached that level three times. Each time it happened, natural gas prices more than doubled within 18 months. The only real exception to this pattern over the past 20 years happened in 1997, when the price dipped below $2.50, rallied back above $3, but then sort of languished near $2.50 before rallying in 2000. It's possible we could see that again. Prices could hold near current levels for a year because natural gas inventories are very high in the U.S. But gas will rally and it is likely that, as with oil, it will rally well before it is obvious that inventory levels are returning to normal."

My Top Three "gassers" are:
Antero Resources (AR)
Gulfport Energy (GPOR)
Range Resources (RRC) >>> We will send out an updated profile on RRC today with my thought on the merger with MRD.

For more exposure to natural gas, Robert likes:
Cabot Oil & Gas (COG)
EQT Corporation (EQT)
Payto Exploration & Development (PEYUF)

Morbius Daily Market Report on Natural Gas:

Weather models, both overnight and mid-day, suggested additional cooling demand could be on the horizon in the southern tier of the country. This was certainly positive news for market bulls which had been thwarted earlier in the week by consistently benign weather forecasts. There does appear to be one remaining weather obstacle in the near term, as forecasts are still calling for significant precipitation totals along the Gulf Coast and in to the Southeast. Warmer temps are a bullish indicator but if precipitation actualizes as forecast, spot pricing may continue to struggle.

The EIA storage report was also a welcome surprise for market bulls. The reported injection of 73 Bcf was approximately 5 Bcf lower than expectations, and well below the 5-yr average (+91) and last year (+98). The surplus to the 5-yr average is down to 795 Bcf after peaking at 874 Bcf in late March. Also supportive in today’s report was the smaller than expected salt injection of +3 Bcf. Salt dome storage inventory currently stands at 371 Bcf or -11 Bcf vs. prior all-time highs.

A few less tangible factors may have also supported the bounce in prices today. Imminent E&P bankruptcy filings, and rumors of unwinding hedge books to increase cash balances, is adding to daily volatility. In addition, daily production the past couple of days could have also supported today’s shift in sentiment. Production on Tuesday and Wednesday returned to levels seen late last week which supports a continued downward path. This is in contrast to earlier this week when production bounced back closer to April’s average. While we remain convinced that extrapolating daily production data is fool’s errand, the trend lower in natural gas production is continually being confirmed this spring. The real test will be at the start of next winter, and questions remain regarding production’s response to higher prices (current winter ’16-’17 strip $2.89).

Oil Complex