Natural Gas Storage Deficit To 5-Year Average Widens Further

Positive Long-Term Thesis

The fundamentals of natural gas continue to be favorable in the long run, considering the secular shift to the cleaner burning fuel for power generation globally and in the Asia-Pacific region in particular.

The EIA predicts global demand for the commodity to grow 43% from 2015 to 2040. Countries in Asia and in the Middle East – led by China’s transition away from coal – will account for most of this increase.

And as the world’s largest gas producer, the United States has emerged as one of the key players – competing with Russia and Australia among others – to meet this soaring demand. With domestic prices struggling to break the $3 per million Btu threshold, American natural gas companies see a big opportunity in selling cheap U.S. production at attractive enough prices to rest of the world. In fact, more than 50% of the domestic volume growth in the near future will be used for export in the form of liquefied natural gas (LNG). As per Paris-based International Energy Agency (IEA), the United States will vie with Australia and Qatar as the top LNG exporter by 2022.

New pipelines to Mexico, together with large-scale liquefied gas export facilities like Cheniere Energy, Inc.’s Sabine Pass terminal and Dominion Energy Inc.’s (D) newly constructed Cove Point export plant, have meant that exports out of the U.S. are set for a quantum leap.

As per the Energy Department, gross liquefied natural gas exports are set to average 2.93 Bcf per day in 2018, increasing more than 50% from last year. Apart from surging exports, the replacement of coal-fired power plants and higher consumption from industrial projects will likely ensure strong natural gas demand.

Finally, if the upcoming (2018-2019) winter turns out to be colder-than-normal, the surge in expected demand in the face of relative deficit of natural gas inventory could trigger a large rally in the commodity's price.

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Beating Buffett 2 years ago Member's comment

That’s okay - the Wall Street liberals are convinced that #natgas is a waste byproduct from #oil #fracking. There’s no shortage.

IB Trading 2 years ago Member's comment

Agreed, there’s so much gas in the Permian that they have to burn it off because there’s no place to store it.

Ayelet Wolf 2 years ago Member's comment

I'm no oil expert but I've never hears such a thing. Are you sure?

IB Trading 2 years ago Member's comment

I’m positive that I’m right and that even though the National tank is headed to “E” that there’s a glut- #JimCramer said so!