MDCigan

A Compelling Energy Ratio

"Everybody has an opinion on how bearish the ng storage numbers are right now. May I remind you that we are still below last year's level and are very unlikely to reach that level by November 1st (considered the beginning of heating season). 5-yr storage avgs although somewhat useful do not paint the full picture mainly because ng demand increases every year and supply/demand picture from 5 years ago may or may not be relevant to the present situation. "

**********************...

You are right about where we sit presently relative to the 5-year average, but I think you are way off about it being unlikely to reach there by Nov 1st. At the rate we are going with injections, the 5-year average might be left in the dust in the coming weeks unless producers curtail production.

As far as supply/demand, off the top of my head, I think 2008 supply growth is running around 8-10% annual growth, while demand growth is around 1-2%. I think that is why just in the past day or so you are seeing commercials with Aubrey McClendon pushing CNG for transportation. Right now, it sure looks like an imbalance to me, and new sources of demand need to come on in short order to absorb this increase in supplies. I am still bullish on NG over the next 3-10 years, but the next 6-12 months could be rough unless something changes quick in the supply/demand picture. I hope many of the producers get smart here and start to curtail production. Either that, or some of the smaller, weaker players need to get killed off and that might happen for those companies that are unhedged if NG goes to 4.