The (simplified) case for Natural Gas
The other day i noticed the break out in PTEN. Seems like it can go to mid 27 or the 200SMA by next week or so.
Because of this break out I decided to look at Natural Gas again, and I found interest stuff. I was a bear in Nat Gas because the storage capacity at 5yr highs. But over the past few weeks Nat Gas has rallied off its lows, while Crude hasn’t really moved. When I stared reading the latest EIA report on Nat Gas I noticed this:
“Owing to higher levels of natural gas in storage compared with the 5-year average and forecasts of warmer-than-normal weather, the average monthly Henry Hub spot price is expected to remain below $9 per Mcf throughout this heating season, although daily prices may exceed that level at times.”
Now this may seem ‘ho-hum’ but what struck me as odd was that the EIA was telling us that the high-end nat gas HH spot price should remain around $9! At a time when capacity is at a 5 year high (and some companies are deterring storage) should stay below 9, but go above now and again. Now so long as I’ve been observing the EIA reports, they have sucked at predicting pricing.
The Nat Gas situation in this country is somewhat troubling, if there is no more capacity for storage, why isn’t it built? Especially since the States is very plentiful in Nat Gas, and it is being used more and more every year?
The high price for Nat Gas will demand more drilling (or at least the illusion for more drilling, and the Nat Gas specific drillers will go up), even though i think the nat gas problem is more of a storage problem then a supply problem.
Whatever the case, with winter not fully upon us, and Nat Gas already approaching the EIA estimate, I’m willing to bet Nat Gas goes higher at least until Jan. (And hopefully it takes PTEN w/it 
, but at these prices I don’t think it matters.)
(Other good driller plays are PDC and GW, but I noticed the break out in PTEN so I highlighted it.)
