Energy Prospectus

Read this > http://realmoney.thestreet.com/articles ... _ven=YAHOO

The supply/demand fundamentals for natural gas and NGLs are good and likely to get better. Natural gas in storage is below the 5-year average today and I think storage levels heading into April will be below the 5-year average with just normal winter weather during the first quarter. Yes, it is going to be warmer than normal for the next ten days, but winter will return the last week of January and early forecasts for February are COLD.

The tightening is not weather related: U.S. + Canada gas production is down 2 Bcf per day and demand for exports, industrial and power generation are going to be a lot higher this summer.

The market still hasn't gotten the message, since natgas futures are clunking back to $3 and gassers such as RRC and AR are taking the pipe (GPOR down another 3 1/2 %). Crude mugged, gold up, confidence taking aspirin. Mkts coming back to reality after the rally pop (?)

Relevant article in today's WSJ discusses how nat. gas is replacing nuclear (as well as coal) for electric gen: http://www.wsj.com/articles/nuclear-pla ... 1483957802

Last week's natural gas storage report showed U.S. storage 21 BCF below the 5-year average. Last week's report showed a draw of just 49 Bcf, which seemed incredibly low to me. Over the years I have noticed that storage reports (oil & gas) during the Christmas/New Year's holiday week can be way off. The EIA does not have measuring devices on storage locations. They rely on reports from the storage locations. With lots of employees on vacation, maybe the storage reports were not updated. For now, let's assume the ngas storage report was accurate.

There are 13 weeks remaining in the winter heating season. The 5-year average draws from storage are 1,519 Bcf during the 13-weeks.

Storage was 3,311 Bcf at 12/30/2016. 3,311 - 1,519 = 1,719

1,719 Bcf in storage at the end of the heating season will compare to 2,480 Bcf at the end of the last heating season. 2,480 - 1,719 = 761 Bcf

Refilling Storage is a BIG PART of demand each summer.

The refill season is April 1 to November 30. 243 days

This is as simple as I can make it:
1.5 Bcfpd = a conservative estimate of how much U.S. + Canadian gas production has declined since the beginning of 2016
3.5 Bcfpd = an estimate of how much industrial, power generation and export demand will increase year-over-year in 2017
3.1 Bcfpd = the amount of additional gas we will need to refill storage back to where it started this winter (761 / 243 days - 3.13 Bcfpd)
8.1 Bcf = How much tighter the U.S. gas market appears to be in 2017 vs 2016

Even if we assume warmer than normal weather for the first quarter, which is not the forecast, we are still looking at a MUCH TIGHTER gas market than last year.

Other than pipes from Canada, we have virtually no other import capacity.

For now, weather reports are driving the speculative traders.

Go read the RBN Energy forecast that I sent out via e-mail early last week. They do a good job of explaining why the NYMEX strip is under-priced and gas prices must move higher to generate more gas directed drilling.

This is an over-simplification, but it is one indication of how much U.S. gas supply/demand has tightened since the end of the last heating season.

Over the last 35 weeks, since the beginning of May, 2016, the natural gas going in and out of storage has been +686 Bcf (injections - draws).

The 5-year average for this 35 week period is +1,536 Bcf. < You can confirm this number at http://www.americanoilman.com/

If the simple answer is that gas going in and out of storage is just the difference between production & demand, then over the last 35 weeks the U.S. gas market is 3.5 Bcf per day tighter.

Here is the math: (1,536 - 686) / (35 X 7) = 3.5 Bcf per day

So the questions I want you guys to think about is: Where will we get another 8 Bcf per day in 2017?

PLEASE do not say that Wall Street must know something that I don't know. Give some thought to it and give some real answers.

Delete - sent privately.

For more on the Macro view of the U.S. natural gas market, go to the Range Resources website: http://ir.rangeresources.com/phoenix.zh ... sentations

Open RRC's January presentation and look at slides 52-61.