Douglas E. John...'s  Instablog

Douglas E. Johnston
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  • A Non-Negative On Natural Gas 0 comments
    Apr 19, 2012 7:05 PM

    Ok, I am not bullish on NG prices, at least in the near term (like until November, maybe) but one non-negative sign is that inventories, while building, are doing so at a slower rate. Examining the EIA data from the weekly storage report shows that over the last five weeks NG in storage rose by 143 bCfe. While not exactly welcome, given we have very high inventories for this time of year, it is noteworthy that in the prior two years, the inventory builds off the bottom (end of March/early April) were 248 and 214 bCfe, respectively. So, while I wouldn't stretch and say this is a positive for NG, I call it a non-negative and it is a sign, albeit tentative, that maybe supply is beginning to adjust to a $2 mCfe world. If the slower inventory build keeps up, worries about topping over current storage capacity will wane and we'll begin trading views on next winter's temperatures --- brrrrrr.

    Disclosure: I am long XCO.

    Additional disclosure: XCO is viewed by many as a leveraged play on natural gas prices

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