Natural gas expectations rising in short- and long-term

Right on the Button!

Well a few tweaks to my model and we called the natural gas number right on the button. While my estimate was off of main stream expectations, the market hit a new high for the year on the 146bcf withdraw. The surge came as supplies fell more than expected in the East as pockets of cold weather and less than expected production caused working gas in storage to fall to 2,083 bcf. That puts supply 14.8% above the five-year average, which is much less than predictions just a few weeks ago. Add to that the forecast for colder than expected temperatures and the front end of the curve on gas is looking very bullish.

Of course it is the long end that we have been talking about for months and after the extremely long term developments that are becoming more apparent, there are many others now jumping on the long term bullish scenario for the gas market.

The odds of natural gas exports are rising as well and as I told Bloomberg News last month, "The LNG thing is going to happen,” said Flynn, who sees gas rising to $7 per million Btu in 2015 before trading in a range of $6 to $8. The market isn't pricing in the LNG export potential yet because "there is a little bit of a denial on how quickly natural gas exports can get done,” he said. "We've had this bearish outlook on gas a long time.”

Shell Oil gave that thought a boost when they came out and said that over the next couple of decades natural gas will be the number one fuel source in the world. Because of the U.S energy industry and the miracle of fracking, the energy world has changed. In another case of low prices curing low prices, the new bull market can now begin.

With Burlington Northern Santa Fe switching to natural gas locomotives, natural gas is on a trek that will not be turned back. Others will follow suit as we move toward a future of natural gas, hydrogen and electric power cars marking an end to the "Era of Oil.” On top of that, because of our competitive advantage on gas, not only will we become a major exporter, we will also see a rebirth of the U.S. manufacturing and chemical sectors as we supply those industries with what will seem like unlimited supplies of cheap gas. Assuming they start to lock it in now.

Add to that Obama's pick for Energy Secretary, Ernest Moniz, is a major supporter of a global natural gas trade. The physicist from the Massachusetts Institute of Technology (MIT) is smart enough to realize both the economic and environmental benefits of the coming natural gas economy.

Rising expectations for the U.S. jobs report and rising expectations for Brent crude oil output helped boost oil yesterday. The break in crude and the anticipated break in demand for the shoulder season helped cement a break in the products. It is possible that if things go well that we may have seen the top in gas price for the year which is a scary prediction ahead of the summer time blends. Still, assuming no major events, retail wise and futures wiser the top for gas prices should be in for the year. I hope I did not jinx it. Keep your fingers crossed.

About the Author
Phil Flynn

Senior energy analyst at The PRICE Futures Group and a Fox Business Network contributor. He is one of the world's leading market analysts, providing individual investors, professional traders, and institutions with up-to-the-minute investment and risk management insight into global petroleum, gasoline, and energy markets. His precise and timely forecasts have come to be in great demand by industry and media worldwide and his impressive career goes back almost three decades, gaining attention with his market calls and energetic personality as writer of The Energy Report. You can contact Phil by phone at (888) 264-5665 or by email at pflynn@pricegroup.com. Learn even more on our website at www.pricegroup.com.

 

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