Winter 2016
Templeton Financial Group
NATURAL GAS
5300 West Atlantic Ave Suite 612 Delray Beach, FL 33484 866-413-2974
Supply Templeton Financial Group feels most of Americas gas 5ields are now experiencing production declines. It appears that almost half of U.S. supply of conventional gas is in a terminal decline, at the same time shale gas is declining. Conventional gas supply has fallen 16.75 bcfd since July 2008. It looks like the increases in shale gas production more than offset those losses. Templeton believes, that is changing as of July 2016. We believe that conventional gas will continue to decline at about 5% per year because few companies are drilling those plays. Shale gas must, therefore, continue to grow by at least 15bcfd per year just to offset our forecasted annual conventional gas decline of 2.5bcfd and legacy shale gas production decline of 12.5 bcfd. Shale gas production replacement and growth for 2015 were 14.5 bcfd, down from almost 18 bcfd in 2014. In our opinion, it will be dif5icult to match 14.5 bcfd in 2016 because shale gas production has been falling 2.2bcfd annualized. Although additional reserves exist in other areas such as Barnett and F a y e t t e v i l l e , t h e s e p l a y s r e q u i r e substantially higher gas prices to be commercial.
The EIA forecasts that net dry gas production will increase 1.4bcfd in 2016 and 1.6bcfd for 2017. Even with this optimistic forecast , their data still shows that the U.S. will have a supply de5icit beginning in the last quarter of 2016. Templeton feels a more realistic forecast implies a potentially much greater de5icit and beginning sooner. A supply de5icit doesn’t mean we will run out. What is different now is that we feel the net imports will reach zero in early 2017 because of decreasing imports from Canada and increasing exports. Adding that challenge to the replacing of conventional gas depletion, and there is potentially much more serious supply problems than EIA’s forecast suggests.
FUTURES AND OPTIONS TRADING INVOLVE SIGNIFICANT RISK OF LOSS AND MAY NOT BE SUITABLE FOR EVERYONE. OPTIONS, CASH AND FUTURES MARKETS ARE SEPARATE AND DISTINCT AND DO NOT NECESSARILY RESPOND IN THE SAME WAY TO SIMILAR MARKETS STIMULUS. A MOVEMENT IN THE CASH MARKET WOULD NOT NECESSARILY MOVE IN TANDEM WITH THE RELATED FUTURES & OPTIONS CONTRACT BEING OFFERED. SEASONAL DEMAND AND CURRENT NEWS IN COMMODITIES ARE ALREADY REFLECTED IN THE PRICE OF THE UNDERLYING FUTURES.
[1]
DEMAND
Export plans of at least 7 bcfd sector. Generally the best cure for low forecasted by 2020 and 13 bcfd by prices is low prices. Meaning when 2 0 3 0 b r i n g s s o m e s i g n i f i c a n t the price is low or inexpensive that challenges for the future without some generally leads to higher demand, but new shale gas plays we are not aware eventually the higher demand can o f . B e y o n d e x p o r t s , t h e U . S . drop supplies and eventually cause consumption of natural gas is higher prices which could eventually projected to rise from 28 trillion cubic create lower demand. feet in 2015 to 34 trillion cubic feet in Low natural gas prices also support 2040 according to EIA. The industrial long term consumption growth in the and electric power sectors make up electric power sector. Natural gas use 4 9 % a n d 3 4 % o f t h i s g r o w t h for power generation reached a respectively. The persistent, relatively record high in 2015 and is expected to low price of U.S. Natural gas in the be high in 2016 as well, likely primary driver for increased natural surpassing coal on an annual average gas consumption in the industrial basis
FUTURES AND OPTIONS TRADING INVOLVE SIGNIFICANT RISK OF LOSS AND MAY NOT BE SUITABLE FOR EVERYONE. OPTIONS, CASH AND FUTURES MARKETS ARE SEPARATE AND DISTINCT AND DO NOT NECESSARILY RESPOND IN THE SAME WAY TO SIMILAR MARKETS STIMULUS. A MOVEMENT IN THE CASH MARKET WOULD NOT NECESSARILY MOVE IN TANDEM WITH THE RELATED FUTURES & OPTIONS CONTRACT BEING OFFERED. SEASONAL DEMAND AND CURRENT NEWS IN COMMODITIES ARE ALREADY REFLECTED IN THE PRICE OF THE UNDERLYING FUTURES.
[2]
In the opinion of Templeton tropical activity at what could be Financial Group, many factors can considered an early start to a aect the price of natural gas, and possible hurricane season. Now, no can come at very unpredictable one knows the outcome of this times. Whether it is a pipeline season and the known market event
GLOBAL MISHAPS
explosion that can cause a temporary o f a n y s t o r m a re f a c t o re d i n disruption in the market place. Or a immediately. The question is what will hurricane in the Gulf of Mexico that be the impact of the remainder of the shuts down oil and gas rigs in some season, should we have one? cases for sustained amounts of time. Summer hot and stormy weather, Even military action that potentially or winter frigid weather can have an causes world oil prices to move immediate and/or lasting impact on higher , which could make natural gas prices, but timing is crucial in more attractive to use for running attempting to forecast future market turbines to generate electricity by direction, so only risk capital should u t i l i t y c o m p a n i e s . A n y m a j o r be used in trading commodity futures d i s r u p t i o n , c a n c a u s e v o l a t i l e and options. movements in short periods of time. At the time of this writing there is
FUTURES AND OPTIONS TRADING INVOLVE SIGNIFICANT RISK OF LOSS AND MAY NOT BE SUITABLE FOR EVERYONE. OPTIONS, CASH AND FUTURES MARKETS ARE SEPARATE AND DISTINCT AND DO NOT NECESSARILY RESPOND IN THE SAME WAY TO SIMILAR MARKETS STIMULUS. A MOVEMENT IN THE CASH MARKET WOULD NOT NECESSARILY MOVE IN TANDEM WITH THE RELATED FUTURES & OPTIONS CONTRACT BEING OFFERED. SEASONAL DEMAND AND CURRENT NEWS IN COMMODITIES ARE ALREADY REFLECTED IN THE PRICE OF THE UNDERLYING FUTURES.
[3]
NATURAL GAS
2016
References http://www.eia.gov/todayinenergy/detail.cfm?id=26412
TEMPLETON FINANCIAL GROUP 5300 West Atlantic Ave Suite 612 Delray Beach, FL 33484
O 866-413-2974 L 561-499-9889 F 561-499-4018
Member of
templetonfg.com
Registered IB of
FUTURES AND OPTIONS TRADING INVOLVE SIGNIFICANT RISK OF LOSS AND MAY NOT BE SUITABLE FOR EVERYONE. OPTIONS, CASH AND FUTURES MARKETS ARE SEPARATE AND DISTINCT AND DO NOT NECESSARILY RESPOND IN THE SAME WAY TO SIMILAR MARKETS STIMULUS. A MOVEMENT IN THE CASH MARKET WOULD NOT NECESSARILY MOVE IN TANDEM WITH THE RELATED FUTURES & OPTIONS CONTRACT BEING OFFERED. SEASONAL DEMAND AND CURRENT NEWS IN COMMODITIES ARE ALREADY REFLECTED IN THE PRICE OF THE UNDERLYING FUTURES. [4]