Winter
Posted: Sat Nov 19, 2016 6:31 pm
If we have a "Normal Winter", I think we will see natural gas prices average over $3.50/mcf in the first quarter. PLEASE note that I'm saying "Normal Winter".
If we have a significant COLD outbreak in the eastern half of the United States in Mid-December (i.e. "Polar Vortex") then we have a good shot of seeing natural gas prices pushing over $4.00/mcf.
Now go watch the Saturday Update (11/19) at http://www.weatherbell.com/premium/
Why am I bullish on natural gas prices?
1. The HUGE surplus of gas in storage at the end of last winter has almost disappeared. Over the last 28 weeks, the injections to storage have been 30% below the 5-year average and almost 33% below last year. This confirms to me that the U.S. natural gas market is MUCH TIGHTER than it was a year ago.
2. The U.S. gas market will continue to tighten: Natural gas production in the U.S. has declined. The rate of decline has flattened out a bit over the last month or so, but that is because of upstream companies completing more DUC wells. Completion of DUCs will slow down during the winter.
3. Demand for gas will keep going up. Industrial demand for gas and exports of gas have significantly increase over the last twelve months. Plus, we are using more gas for power generation. This trend will continue in 2017.
You may recall that last December was very warm because of El Nino. The weekly natural gas storage reports this December will look very bullish to Wall Street traders because the draws from storage will be MUCH LARGER than last year if we just have normal weather.
> We are going to begin this winter heating season with 4,050-4,060 Bcf in storage compared to 4,009 Bcf last year. I know this sounds like a lot of gas, but utility companies need more gas in storage each year to insure we have enough gas for space heating. Even if winter weather is exactly the same each year, demand for residential and commercial space heating will go up year-after-year. A normal winter will increase demand 1.0 to 1.5 Bcf per day, over last year.
> Before Christmas, the gas in storage should be below where it was last year. This will draw the attention from Wall Street traders.
> If the U.S. weather pattern has turned COLD when that happens, I think the speculative traders (who set the near-term gas price) will go long.
Things are lining up for a Merry Christmas for our "gassers".
If we have a significant COLD outbreak in the eastern half of the United States in Mid-December (i.e. "Polar Vortex") then we have a good shot of seeing natural gas prices pushing over $4.00/mcf.
Now go watch the Saturday Update (11/19) at http://www.weatherbell.com/premium/
Why am I bullish on natural gas prices?
1. The HUGE surplus of gas in storage at the end of last winter has almost disappeared. Over the last 28 weeks, the injections to storage have been 30% below the 5-year average and almost 33% below last year. This confirms to me that the U.S. natural gas market is MUCH TIGHTER than it was a year ago.
2. The U.S. gas market will continue to tighten: Natural gas production in the U.S. has declined. The rate of decline has flattened out a bit over the last month or so, but that is because of upstream companies completing more DUC wells. Completion of DUCs will slow down during the winter.
3. Demand for gas will keep going up. Industrial demand for gas and exports of gas have significantly increase over the last twelve months. Plus, we are using more gas for power generation. This trend will continue in 2017.
You may recall that last December was very warm because of El Nino. The weekly natural gas storage reports this December will look very bullish to Wall Street traders because the draws from storage will be MUCH LARGER than last year if we just have normal weather.
> We are going to begin this winter heating season with 4,050-4,060 Bcf in storage compared to 4,009 Bcf last year. I know this sounds like a lot of gas, but utility companies need more gas in storage each year to insure we have enough gas for space heating. Even if winter weather is exactly the same each year, demand for residential and commercial space heating will go up year-after-year. A normal winter will increase demand 1.0 to 1.5 Bcf per day, over last year.
> Before Christmas, the gas in storage should be below where it was last year. This will draw the attention from Wall Street traders.
> If the U.S. weather pattern has turned COLD when that happens, I think the speculative traders (who set the near-term gas price) will go long.
Things are lining up for a Merry Christmas for our "gassers".