Monday, March 27, 2017 7:09:45 PM
"Natural gas prices rose 3 cents or 0.8% on Friday to close near 1-month highs at $3.08/MMBTU. For the week, gas was up 3.4%. It was the second straight weekly gain and the third in the past month for the commodity. The rally was driven by a record bullish -150 BCF withdrawal in Thursday's EIA storage report and expectations for a prolonged period of seasonally mild temperatures that should limit any large builds in the storage surplus. Despite a storage surplus which is down more than a third from its peak, the commodity continues to become increasingly overvalued versus my calculated Fair Price. Based on current inventories alone--which, as of this morning are estimated to be at a +261 BCF surplus versus the 5-year average--natural gas is overvalued by 6%. And based on long-term projections that take into account temperature forecasts and estimated temperature-independent supply/demand balance, the commodity is trading at a bearish 9% overvaluation versus its 8-month average Fair Price. See more on Fair Price data HERE. While I continue to hold a long position in the commodity, should natural gas rise early this week, I will have a very low threshold to take profits and even consider initiating a small short position."
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