United States Natural Gas Fund LP (UNG)

[msmithgold]

Natural Gas Is Mispriced

Summary of RBN Energy 2017 Prognostications

Natural gas, particularly wet natural gas, will be a more attractive market than crude oil

No big recovery in crude, gas forward curve too low, and NGL prices increasing more than both oil and gas

Ethane production will be ramping up as rejection flips to recovery
Between late 2017 and end of 2018, almost all ethane rejection in PADD 3 and 4 will be recovered; only ethane rejection will be due to pipeline constraints out of Marcellus/Utica and Bakken

The frac spread is coming back along with margins for gas processing
Heading back to $5-6/MMBtu level after languishing at $2.30 from Jan. 2015 through end of 2016; good news for processors and producers

Big natural gas price differentials are coming to West and South Texas
Won’t be long before Waha could experience takeaway constraints and situation similar at Agua Dulce

The new administration may Trump down oil and gas prices
US succeeded in overproducing under carbon-unfriendly Obama administration – what might they do if the shackles come off?

The natural gas forward curve is mispriced
As of last day of 2016, 2017 strip was $3.62, 2018 was $0.48 lower and 2019 was $0.27 lower at $2.87; strip in 2022 is only $2.93 – it just can’t be

Capital will drive economics
Historically, plays with best economics attracted capital; now, producers with access to capital are building out significant contiguous acreage positions in their core areas

Rig productivity will continue to improve
From 2011 to 2016, rig productivity was up 260% in Bakken, 465% in Permian, and 840% in Niobrara; this trend is going to be with us for the foreseeable future

US crude production in 2017 will increase, but not at the 1 MMb/d a year growth rate seen from 2012-2014
Decline curves are flatter in the marginal basins and production declines from older wells are slowing; it makes it easier for new wells in the Permian to contribute to production growth

We’ll see no crude price breakout in 2017, one way or the other
OPEC and NOPEC will muddle along and US E&P’s will contribute to the muddle by increasing crude production over time to offset a portion of any real OPEC/NOPEC cuts

Summary of RBN Prognostications: https://investoralmanac.com/2017/01/05/energy-prognostications-for-2017/