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Gold/Mining/Energy : Big Dog's Boom Boom Room
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To: jim_p who wrote (38446)1/14/2005 3:43:45 PM
From: quehubo  Read Replies (1) of 206326
 
Investors who have primarily focused on storage levels to determine supply and demand (risk reward in sector) have lost their asses over the last year.

Having 300 bcf of "extra storage" for the last six months is not a clear indication of increased production. Looking at what price is paid to put and retain that 300 bcf into storage supports another conclusion.

The production reports from Lehman cite 50%+ of NA NG production from quarterly reports. We do have very good data on rig counts through LRN and the relationship between the public and private companies drilling history does not support any suggestion that the private E&P's are even covering the decreases in production from the public companies let along provide a net increase for NA.

The Lehman data indicates a 1.4 bcfpd decrease in supply in 2005 from 2004. This totals 511 bcf for the year, so ending with a few hundred bcf more in storage on 4/1 still means there will be a tough battle in 2005 to fill storage.

The extended futures strip does not lie. The pipeline operators, storage operators and many E&P's see the relationship between supply and demand up front. Including supply from Mom & Pops.

My understanding is that there is substantial price sensitive demand waiting under $6.

Anyway I can turn on a dime here again, but the recent draws give me great comfort that supply and demand are balanced at these prices for now.
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