Natural gas declined last week due to anticipation of above average injection. The injection numbers came in at 95bcf which resulted in a sharp short covering. However, bears continued to dominate on Friday, resulting in a ~2% drop.
I see this a short term test of the downside and possible due to the cooler weather outlook which translates to above average injections again.
Nevertheless, I continue to be bullish on Natty due to these reasons:
1. Shale gas production decline (very soon), other than the marcellus region, all other shale plays are experiencing production decline.
2. Low rig count 353... there is usually a lag of about 6 months from rig count to injections number. 6 months ago, rig counts declined... so we are going to see production decline starting to kick in soon.
3. Increased permanent coal - gas switching
4. Summer heat is coming... natural gas is pressured to rise
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