Natural Gas Up Over 25% Since February 1, Wells Fargo Forecasting $3.40/MMBtu
A recent research report by Wells Fargo Securities calls for tightening supply/demand fundamentals, providing further support to their natural gas price forecast of $3.40/MMBtu on average for the remainder of 2017, which is 9% above consensus estimates and highest on the Street.1
The report goes on to say that there is a lack of natural gas storage, noting that natural gas fundamentals were running approximately 2 Bcf/d below supply after adjusting for temperature variations versus historical averages. Recent natural gas storage data appears to support their point of view.
Oil prices also made a significant recovery last month, moving from approximately $48.00 to $53.00/BBl, a 10% increase.
ValueScope Now Offers SEC Reserves Reporting
ValueScope is proud to announce that we are now working with Albert (Bert) McDaniel, P.E. to offer our clients SEC reserves reporting. Bert has more than 30 years of engineering and banking experience, with specific expertise in drilling, production and reservoir engineering, including economic evaluations for banks. Bert’s experience, combined with ValueScope’s deep expertise with industry standard software products like PHDWin and advanced Monte Carlo analyses, allow us to efficiently produce these reports. Additionally, our Chartered Financial Analysts, PhD Economists, and engineering group have demonstrated experience and expertise in developing fair market valuations of these reserves.
Crude Oil Outlook
While futures markets aren’t a crystal ball, their price levels and related options are useful for estimating future ranges or “confidence intervals” for crude oil and natural gas prices.
The graphic below shows the crude oil price on April 17, 2017, and predicted crude oil prices based on options on oil futures contracts (ticker /CL). The blue lines are within one standard deviation (σ) of the settlement price (green line) and the red lines are within two standard deviations for each month (for a refresher on standard deviations, see the January 2016 blog).
Based on April 17, 2017 prices, the futures markets indicate that in mid-July 2017, there is about a 68% chance that oil prices will be between $47.00 and $61.00 per barrel. Likewise, there is about a 95% chance that prices will be between $38.50 and $69.00. For a longer-term view, by mid-December 2017, the +/- 1σ price range is $43.50 to $67.00 per barrel, with an expected value of $54.71.
Natural Gas Outlook
We can do the same thing for natural gas futures, currently trading at $3.23 per MMBTU on the Henry Hub (ticker /NG). Although more affected by seasonal factors than crude oil, in July 2017, the +/- 1σ price range is $2.85 to $4.05 per MMBtu, and the 2σ range (95%) is $2.35 to $5.05 per MMBTU. The expected value of natural gas prices in mid-July 2017 is $3.42 per MMBTU.
1. Wells Fargo Equity Research, Exploration and Production, April 12, 2017
Tags: Oil & Gas Price Outlook April 2017, Gas Price Outlook Apr 2017, Oil Price Outlook Apr 2017
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