Reasons to Buy:
- Weather normalized demand continues to grow.
- Several new LNG facilities coming online in the next year.
- Market will turn bullish quickly depending on how hot it gets (cooling demand.)
Reasons to Wait:
- Current forecasts for average summer temps may keep 5 year surplus intact heading into winter.
- Market fell overnight on expectations of lower cooling demand in the coming weeks.
- With natural gas production growth projected and significantly higher rig counts versus last year, the market could fall if incremental demand doesn’t keep up.
- 186 gas rigs (-1 this week) vs. 88 gas rigs last year.
Gas Market Highlights:
- Last week was the 15thstorage report and 15th injection of the 2017 Injection Season. Injection (28 BCF) was within analysts’ expectations (25-40). Storage is now 299 BCF below last year’s level and 141 BCF above the 5 year average.
- Year over year deficit has increased 3.5% since the previous week.
- Surplus over 5 year average has decreased 18.0% since the previous week.
- August 2017 NYMEX trading at 2.899 after opening at $2.914.
- Next 7 days:
- 0.5-2 above normal for the Midwest, 0-3 below normal in the Northeast.
- Week following:
- 0-3 below normal for most of the US.
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.