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Gas and Power Kaleidoscope:It’s always darkest before the dawn

研究机构:巴克莱资本银行 研究员:巴克莱资本银行研究所 发布时间:2015-11-21

In the short term, it is hard to argue with the bearish fundamentals as we headinto this winter. High storage levels and resilient production have caused us tolower our 2016 natural gas price forecast from $2.95/MMBtu to $2.84/MMBtu.

However, the balances should start to tighten in H2 16 as production growthslows and new demand enters the market in the form of LNG exports, growingpipeline exports to Mexico, new industrial demand and strong power burn.

In this month’s Kaleidoscope, we release our quarterly 2016 price outlook. Theoutlook shows a relative improvement in prices over the course of the year. Wesee Q1 price averaging $2.65/MMBtu, Q2 $2.45/MMBtu, Q3 $3.10/MMBtu andQ4 $3.15/MMBtu. This forecast makes us bullish relative the curve for H2 16.

However, weather will be the major factor deciding if the natural gas markettightens in 2016 or faces another year of oversupply.

The market is doing what it can to rebalance, but El Ni?o poses downside risk to ourprice forecast, which assumes normal weather. A 4% warmer than normal winterwould cut at least 2 Bcf/d of residential/commercial demand and would leavestorage levels in April around 15% higher than our base case estimate of 1.7 Tcf.

In this scenario, downside price risk could be around 25-30 cents/MMBtu to ourbase case forecast of $2.84/MMBtu. Even in this scenario, we continue to see anupward trend in prices in H2 16 due to new market demand.

The futures market is currently pricing in a warm winter. Keep a close eye onweather and production. If this winter is not warm as forecasted and year-onyearproduction increases disappoint, the pieces should be in place for a secondhalf2016 rally.

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