Gas Market Update – End of May

Published: May 31, 2017

Reasons to Buy:

  • Structural demand is projected to continue increasing.
    • Both takeaway capacity from the Northeast and LNG export capacity are increasing.
    • When you strip away the effects of the bearish weather we’ve experienced, the supply/demand balance easily flips to bullish.
  • Moving into warmer months, cooling demand will have an increasingly stronger influence.

Reasons to Wait:

  • Forecasts of wet weather may keep the Northeast from getting too hot this summer.
    • Shoulder season continues on: Next 2 weeks are projected to be cooler than normal for most of the US.
  • With natural gas production growth projected and significantly higher rig counts versus last year, the market could fall if incremental demand doesn’t show up.

Gas Market Highlights:

  • Last week was the 7thstorage report and 7th injection of the 2016-17 Injection Season.  Injection (75 BCF) was below analysts’ expectations (63-70 BCF).  Storage is now 371 BCF below last year’s level and 241 BCF above the 5 year average.
    • Year over year deficit has decreased 1.07% since the previous week.
    • Surplus over 5 year average has decreased 5.9% since the previous week.

  • July 2017 NYMEX trading at 3.145 after opening at $3.25.

Weather Highlights:

  • 0-3 below normal across the US for the next two weeks.

Note:  Although natural gas does not necessarily indicate where electricity pricing is at, it is good as a general barometer for electricity markets as a whole.  When gas gets expensive, so does electricity generated from natural gas.

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