Don't Trust the EIA!
The 5-year average for the 1st week of June is around 88 Bcf of gas injected into storage.
This week's storage was reported by the EIA as 69 Bcf, 19 Bcf less than average. Gas shot up really fast like a rocket. Then buyers realized that analysts were expecting a storage addition of 66 Bcf so gas prices crashed as quick as they shot up. Then about an hour later, gas buyers realized the injection rate was 19 Bcf less than average so gas slowly moved back into the green.
Sounds like someone is playing games. Why should what market-manipulating analysts project even enter the picture. Analysts are a dime a dozen and almost never right on anything. So let's forget the analysts and back up and think about the situation for a minute. The summer season is when we inject gas into storage so we can make it through the winter heating season. If the 5-year average injection is 88 Bcf, then gas going into storage was down 21% for the week. In other words, if we keep up this average, we will inject about 400 Bcf less into storage by the 20th of November, 2016. Keep in mind that NOAA is predicting the hottest summer in the history of the world so a fair guess (if NOAA's prediction comes true) is about 500 billion cubic feet less going into storage in 2016.
Working gas in storage is about 2,950 Bcf as of today. The five-year average is 2,337 Bcf. If we get the hot summer as promised, we will enter the winter heating season at or near the 5-year average as opposed to a record high of 4,009 Bcf on November 20, 2015.
LNG exports were nil in 2015, but EIA projects LNG gross exports will rise to an average of 0.5 Bcf/d in 2016. Assuming this is true, LNG will require 15 Bcf per month from July thru November or 75 Bcf.
Exports to Mexico will rise in 2016 about 1 Bcf/d or 30 Bcf per month which will be close to 150 Bcf from July thru November. If we deduct the 225 Bcf from the average storage we will go into the winter heating season with 2,125 Bcf in storage.
If we get a NORMAL winter as projected with some major snow storms, we will run completely out of natural gas by March 30th.
The only thing that will save us is a whole lot of drilling that has not even got under way yet! On the other hand, there was 236 rigs drilling for gas this time last year.
So... now you see why I think Chesapeake, the 2nd largest natural gas producer in the US will hit $10 by the end January 2017. I see a spike coming during a big Northwestern or Northeastern snowstorm in which nat gas could shot up to $8/mmBtu just for a day or two. I also see Canada running out of Nat Gas because if NOAA is correct the northern Jet stream will more further north and dump a ton of snow and cold all over Canada. Canada will have to import from the US, not export to the US.
I believe my numbers are correct simply because I would not lie to myself on purpose. And I don't give a rat's butt if you believe me or not. This post is written for my own purposes, not yours. The reason way I'm not trying to bullshit you is because it would be stupid. There is less than 30 members of this group, not even a drop in a tall bucket. Blowing smoke up your butt would be really stupid on my part because we are so few.
In the previous five winters, the total withdrawal from the 20 November through the end of March averaged 2,176 Bcf. The average going into this winter's heating season will be 2,125 Bcf so we could easily have a shortage on nat gas.
The 52-week range for natural gas is $1.94 to $3.17. One year ago the price for a million BTUs was around $3.12. I expect to see an average of $4 with one or two day spikes to $8 in January 2017.
As girlfriend says, we are going through POO now so just hang in and you will be rewarded. There has been a lot of accumulation at cheap prices lately simply because a lot of weak hands are selling out. The buyers usually get their daily fill by 3 pm and the prices start to drop as the market maker shorts the stock. The market maker then sells his shorts back to the next days buyers. This is normal for the kind of trading we are doing. The volume was 39 million yesterday and I expect this to continue all month.
Volume is important because it confirms price. I think a lot of buyers will be loading up on Chesapeake simply because there is zero chance of BK proceedings and the company has an unused $4 billion credit line to ramp up production.
Exxon produce 3,186 MMcf/day in the last 6 months of 2015. Chesapeake Energy 2,979 MMcf/day during the same period (only 207 MMcf/day less). Chesapeake could easily out produce Exxon and become the largest nat gas producer in the US.
Remember $10 by the end of January 2017 -- 7 short months from now!
