Reasons to Buy:
- Weather normalized demand continues to grow.
- At least 90,000MW of new natural gas generation currently being developed (150+ new plants to be online by 2020.)
- Gas exports continue to increase:
- July 2017 exports were 31.7% higher than July 2016 (+1.9 Bcf/day)
- Mexican gas exports expected to double by 2019.
- Several new LNG facilities coming online in the next year.
- Market will turn bullish quickly depending on weather.
- Warmer weather expected for the next two weeks.
- ~3 weeks left before we start discussing withdrawals, focus is shifting to winter heating forecasts.
Reasons to Wait:
- 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.
- 189 gas rigs (-1 this week) vs. 96 gas rigs last year.
- July 2017 dry gas production averaged 0.4 Bcf/day higher than in July 2016.
- Gas consumption (excluding exports) this injection season has averaged lower than last year, primarily due to reduced power generation demand.
- July 2017 power generation demand was 7.9% less than in July 2016 (-2.8 Bcf/day)
Gas Market Highlights:
- Last week was the 25thstorage report and 25th injection of the 2017 Injection Season. Injection (58 Bcf) was within analysts’ expectations (50-73). Storage is now 127 Bcf below last year’s level and 41 Bcf above the 5 year average.
- Year over year deficit has decreased 6.6% since the previous week.
- Surplus over 5 year average has decreased 38.8% since the previous week.
- November 2017 NYMEX currently trading at 2.915 after opening at 2.925.
- Next 7 days:
- 1-6 above normal for most of the Northeast and Midwest. 2-6 below normal in the West.
- Week following:
- 1-6 above normal for the East and Midwest. 2-6 below normal in the West.
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.