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Leaf River Is In The Process Of Expanding Its Natural Gas Storage Fields From 32 Bcf To 48 Bcf. (Supply Side To Natural Gas Continues To Expand, While Demand Falls.)

|Includes: CHK, JPM, SPY, The United States Natural Gas ETF, LP (UNG), XOM

Leaf River is in the process of expanding its Natural Gas Storage Fields from 32 bcf to 48 bcf. (Supply side to natural gas continues to expand, while demand falls.)

For al the natural gas players we must question the demand and supply side of the equation. As we have seen utilities have been dropping their use of natural gas, while storage continues to expand. This is evident by Leaf River's expansion plans from 32 bcf to 48 bcf.

So why would a storage operator want to expand right now? Because we are producing so much natural gas they feel they can increase revenues through more capacity.

When production expands, so does storage capacity.

And if we are in an ocean of natural gas it is great for storage companies. However, as a result of this new supply market gas prices go down, while storage rates stay relatively the same. Given more natural gas available more people then compete to sell that natural gas, and this drives CME natural gas prices down.

Thus, hypothetically if we were in a time of low supply no one in their right mind would expand a storage facility.

Only when supply exceeds storage capacity do you expand your facility for natural gas.

And the Leaf River is but one of a handful of other storage facilities who are expanding or have plans to expand.

Yet here is the key to this post. If our storage facilities are expanding and actual usage of natural gas is declining by utilities with the advent of renewables such as wind and solar going large in electricity production (Elon Musk's Solar City Case in point), then prices will be set to fall.

We see prices set to tumble once speculators realize all the variables against them. Oceans of natural gas, more storage needed to hold that gas, and renewables taking load requires from power generators, which all equates to the perfect storm.

here are some images from the Leaf River Project, obtained from the FERC website,

Happy trading/// be ready for rapid changes,