Natural Gas Fundamental Forecast – February 9, 2016

Analysis and Recommendations:

Natural Gas added 51 points to 2.114 as winter weather pushed across the East Coast increasing demand for the commodity.  There is no denying right now that natural gas prices are incredibly low. In the graph below, you can see that prices are trading near the bottom of their 19-year range at around $2.1 to $2.2 per MMBtu. To put this in perspective, with the exception of a brief stint in 2012 and another around 2009, this is the lowest that prices for natural gas have been since about 2003, a sign that sentiment in this area is incredibly poor.

The most significant impact is on greenhouse gas emissions. Emissions in America have dropped to a 27-year low mostly as a result of natural gas replacing coal, plus significant gains in efficiency. Over the past ten years, electricity from coal has decreased by 25% and electricity from gas has increased about 35%.

Continuing this trend of gas for coal, continuing improvements in efficiency, increasing demand response and adding a lot of electric vehicles will account for most of the work in achieving our carbon emissions goals by 2030, which are to cut them by 32% from 2005 levels. However, to achieve our 2050 goals of cutting emissions by 80%, it will take more than just gas, particularly more nuclear, hydro, and renewables not having to be load-followed by gas.

Strong natural gas production persists despite the continued drop in the number of domestic drill rigs operating in the face of stubbornly low wellhead commodity prices. Bentek Energy reports that the American Northeast set a new daily dry gas production record of 22 billion cubic feet over the December 5th weekend and total domestic production was over 72 Bcf/day by the end of 2015.

Natural Gas Weekly Weather Outlook

Feb 5-11th: A strong cold front continues pushing off the East Coast with heavy showers and thunderstorms. A weather system will spin up along this boundary today and bring rain and snow along the immediate NE Coast. Behind the front, overnight temperatures are in the single digits to lower 20s with subfreezing temperatures also pushing deep into the South. Over the weekend, a polar front will graze upper New England with light snow, while a milder weather system brings rain to the SE. Finally, a strong cold blast will arrive early next week with colder temperatures and areas of snow, including deep into the South. Overall, nat gas demand will be MODERATE increasing to HIGH.

FxEmpire provides in-depth analysis for each asset we review. Fundamental analysis is provided in three components. We provide a detailed monthly analysis and forecast at the beginning of each month. Then we provide more up to the data analysis and information in our weekly reports, which covers the current week and are published by Sunday before the new week begins. Daily we share any new events, forecasts or analysis that affect the current day. To achieve a full accurate understanding it is important that you study all of our data and analysis as a whole.

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Natural Gas Weekly Update
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