Goldman Says NG to Average $4.50 For Second Half 2013
The price of natural gas is surging on Friday. Among the week’s highlights: A steep fall in the domestic natural gas stockpile and a bullish report by Goldman Sachs (GS).
On Thursday, the U.S. Energy Information Administration said underground gas storage fell by more than expected, pushing the stockpile to 2.1% below the five-year average for this time of year, according to Dow Jones Newswires’ Jerry A. DiColo.
“The reduced amount of gas in storage still has the market’s attention,” said Gene McGillian, a broker and analyst at Tradition Energy. “The supply outlook is much tighter than people anticipated.”
Then there was the late-week Goldman report, which calls for gas to reach $4.50 to keep storage levels up to snuff:
We believe Henry Hub natural gas prices will need to rise to $4.50/MMBtu in 2H 2013 to keep gas storage levels near balance and stimulate greater drilling activity in preparation for the beginnings of the demand response to the shale gas transformation in 2014. We raise our 2013 Henry Hub natural gas prices to $4.15/MMBtu from $3.75/MMBtu as we believe a further 200 Bcf demand shift to coal from gas is needed to keep gas storage in balance. We continue to expect $4.25/MMBtu in 2014, the midpoint of a $4.00-$4.50/MMBtu weather-normal range for natural gas we expect through 2018. While gas sentiment has improved, we believe the Street is still not appreciating a continuation of favorable storage trends vs. the 5-year average in 2Q 2013. We continue to have a multi-sector approach for natural gas exposure – our favorites include SWN/COG among E&Ps, CLD for coal, HAL/BAS/NBR for oil services and NRG for IPPs.
Gas storage surplus is gone, and production is showing some signs of decline. The gas storage surplus vs. the 5-year average, +925 Bcf a year ago and projected by us a month ago would end March +200 Bcf, is now a deficit of 37 Bcf as reported on April 4 for the week ended March 29.
Goldman forecasting higher prices just before major heating season is almost over, on the heels of some seasonally colder than normal weather....
Yes it is possible for prices to stabalize near 4.50, if demand continues in some fashion from summer heat waves, or increased industrial usage, or decreased production. BUT its the end of winter and its not clear that production will is decreasing.
Sounds more like a case of front running by GS for a classic short term seasonal pump and dump.
Although beyond 2013 I don't disagree.