Energy Prospectus

U.S. natural gas (UNG +3.7%) jumped 4.4% to $3.06/MMBtu, the highest settlement of the month, after EIA inventory data showed a smaller than forecast build of 78 Bcf, following a build of 106 Bcf in the prior week. Natural Gas in storage is now 10.6% below last year’s level, but they remain 9.2% above the five-year average. Wells Fargo (NYSE:WFC) analysts say the bullish data marks a reversal of a four week trend in which the storage injection was higher than expected by 6 Bcf on average each week, and provides further confirmation that natural gas markets are at least 2 Bcf/day undersupplied. Based on current weather forecasts, Wells forecasts a 102 Bcf cumulative injection over the next two weeks, which would bring the storage surplus vs. the five-year average down to just 182 Bcf. "Shoulder Season" is coming to an end as summer demand for power generation ramps up.

Meanwhile, U.S. crude oil settled another 0.6% lower at $44.46/bbl after plunging 3.7% yesterday.
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The "bloodbath" in the upstream equities sure seems overdone today with oil only down slightly and natural gas up. Wall Street fund managers have a "herd mentality" and the herd decided to head for the exit all at the same time. Absolutely no reason for the "gassers" to be down today. Unless we have a very mild summer in the eastern half of the U.S. we are going see gas storage levels near the 5-year average within a few months and at a MUCH LOWER level than a year ago when winter heating season arrives.
As I posted yesterday, Q2 results for our model portfolio companies are going to be good, about the same as Q1. My valuations will come down a bit if oil prices stay where they are today, but I want to wait a few weeks to see if we get more clarity on the weekly inventory reports. It sure doesn't help when the API and EIA numbers are so far apart each week.

Results are mixed among stocks of top nat gas producers: CHK -0.9%, COG +0.7%, EOG -2.4%, XOM -0.1%, RRC -0.4%, SWN +1.4%, EQT +0.1%, RICE -1.9%, AR +1.6%.

we had a lot of buying on very high volume last 10 or 12 minutes. eg, sm had 15% of its vol during this period helping it to close above 16.

Sometimes I wonder what traders are thinking. Antero Resources (AR) has more than 100% of their 2017 natural gas production hedged and close to 100% hedged for 2018, so they get zero benefit from rising natural gas price. However, they were the only Sweet 16 company up today. RRC and GPOR are much more exposed to current year gas prices and they were both down slightly even though ngas price was up 4% today. All three of these companies have almost no exposure to oil prices.

The EIA report on 9/14 shows U.S. oil production of:

9,342,000 BOPD for the week ending 5/26/2017
and
9,330,000 BOPD for the week ending 6/9/2017

I have not seen this mentioned anywhere. Oil in U.S. storage was up the week of 6/2/2017 because of a spike in imports, not domestic production. Imports fluctuate wildly from week to week because it just depends on when tankers unload.