7:56AM Lehman downgrades large-cap E&P stocks : Lehman lowers their sector rating for the large-cap Exploration & Production stocks to Negative from Positive, saying near-record natural gas storage injection levels should allow storage levels to catch up to historical avgs by mid-Oct, which could lead natural gas prices to fall sharply. Downgrades BR, DVN, and EOG to Equal-Weight from Overweight, and downgrades ECA to Underweight from Equal-Weight; firm also upgrades TLM to Overweight from Equal-Weight based on improved near-term production growth outlook, their shift away from North American gas-levered names (about 35% of TLM`s production is North American gas), and attractive relative valuation.
In fact, I suspect they are short a bunch of gas contracts and want to cover cheaply.
There interpretation is obvious and highly dependent on something they can't forecast (the WEATHER!). Unless the winter is exceptionally mild, we won't see <$3 gas. Supply just isn't available anymore.
The decline in nat gas a couple winters ago was the result of a mild winter and the Canadian LadyFern field. LadyFern was quickly drained. It is mostly gone now from unchoked production and such a find doesn't come along every year.