Energy Market Outlook

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1 Kyle Cooper, (713) , Week Ending November 23, 2018 Please contact me to review a joint RBN Energy daily publication detailing natural gas fundamentals. Price Action: The December contract rose 3.6 cents (0.8%) to $4.308 on a 64.2 cent range ($4.864/$4.222). Price Outlook: The market edged higher on continued bullish weather forecasts. Although inside weeks are considered rare, after last week s huge $1.194 range, an inside week is not surprising. The market is extremely sensitive to change weather forecasts and will remain volatile. If temperatures remain below normal, last weeks $4.929 high will likely not be the high. For daily updated storage projections, subscribe to our joint publication with RBN Energy. CFTC data indicated a 52,996 contract increase in the managed money net long position as longs added and shorts covered. The is the smallest short position on record for comparable data. This is the largest net long position since February 20. The long position is 389,656 contracts smaller than the record long position of 809,566 from April 16, 2013.Total open interest rose 228,338 to million as of November 13. Aggregated CME futures open interest fell to million as of November 23. The is the smallest OI since September 28, The current weather forecast is now cooler than 8 of the last 10 years. Pipeline data indicates total flows to Cheniere s Sabine Pass export facility were at 3.2 bcf. This flow volume suggests feed gas is entering Train 5. Cove Point is net exporting 0.8 bcf. Weekly Storage: US working gas storage for the week ending November 16 indicated a withdrawal of (134) bcf. Working gas inventories fell to 3,113 bcf. Current inventories fall (613) bcf (-16.5%) below last year and fall (718) bcf (- 18.7%) below the 5-year average. Storage Outlook: The EIA weekly implied flow was (14)bcf from our EIA storage estimate. This week s storage miss is well above our tolerance. The forecasts use a 10-year rolling temperature profile past the 15-day forecast. Our joint publication with RBN updates storage projections daily. Supply Trends: Total supply rose 0.5 bcf/d to 81.6 bcf/d. US production fell. Canadian imports rose. LNG imports rose. LNG exports rose. Mexican exports fell. The US Baker Hughes rig count fell (3). Oil activity decreased (3). Natural gas activity was unchanged +0. The total US rig count now stands at 1,079.The Canadian rig count rose +7 to 204. Thus, the total North American rig count rose +4 to 1,283 and now exceeds last year by The higher efficiency US horizontal rig count fell (10) to 929 and rises +143 above last year. Demand Trends: Total demand rose bcf/d to bcf/d. Power demand rose. Industrial demand rose. Res/Comm demand rose. Electricity demand rose +5,622 gigawatt-hrs to 77,175 which exceeds last year by +4,497 (6.2%) and exceeds the 5-year average by 5,534 (7.7%%). Nuclear Generation: Nuclear generation rose 3,020 MW in the reference week to 82,664 MW. This is (6,255) MW lower than last year and (2,147) MW lower than the 5-year average. Recent output was at 88,183 MW. The heating season has begun. With a forecast through December 7 the 2018/19 total cooling index is at (684) compared to (520) for 2017/18, (359) for 2016/17, (445) for 2015/16, (621) for 2014/15, (641) for 2013/14, (542) for 2012/13 and (519) for 2011/12. Page 1 of 5

2 Feb-17 Apr-17 Jun-17 Jul-17 Sep-17 Nov-17 Jan-18 Mar-18 Apr-18 Jun-18 Aug-18 Oct-18 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Apr-17 Jun-17 Jul-17 Sep-17 Nov-17 Jan-18 Mar-18 Apr-18 Jun-18 Aug-18 Oct-18 $/MMBtu CL/NG Ratio $13 $/MMBtu Ratio of NYMEX CL and NG NG $/MMBtu CL $/MMBtu $/MMBTU CL/NG Ratio 4.50 $ $ $ $ $ $ NYMEX Calendar Strips $3.30 NG Cal 2018 NG Cal 2019 NG Cal 2020 NG Cal 2021 $3.20 $3.10 $3.00 $2.90 $2.80 $2.70 $2.60 $2.50 Page 2 of 5

3 5-Jan 19-Jan 2-Feb 16-Feb 2-Mar 16-Mar 30-Mar 13-Apr 27-Apr 11-May 25-May 8-Jun 22-Jun 6-Jul 20-Jul 3-Aug 17-Aug 31-Aug 14-Sep 28-Sep 12-Oct 26-Oct 9-Nov 23-Nov 7-Dec 21-Dec 4-Jan BCF 5-Jan 19-Jan 2-Feb 16-Feb 2-Mar 16-Mar 30-Mar 13-Apr 27-Apr 11-May 25-May 8-Jun 22-Jun 6-Jul 20-Jul 3-Aug 17-Aug 31-Aug 14-Sep 28-Sep 12-Oct 26-Oct 9-Nov 23-Nov 7-Dec 21-Dec 4-Jan BCF 4,200 4,000 3, 3, 3,400 3,200 3,000 2, 2, 2,400 2,200 2,000 1, 1, 1,400 1,200 1,000 US Total Working Gas Storage - Source - EIA Yr Avg 5 Yr Avg Forecast Max Min 4,200 4,000 3, 3, 3,400 3,200 3,000 2, 2, 2,400 2,200 2,000 1, 1, 1,400 1,200 1,000 Canadian Working Gas Storage - Enerdata Yr Avg 5 Yr Max 5 Yr Min Page 3 of 5

4 bcf/d bcf/d 86 US Total Suppy Current Yr Ago 5 Yr Avg 5 Yr Max 5 Yr Min US Total Demand Current Yr Ago 5 Yr Avg 5 Yr Max 5 Yr Min Page 4 of 5

5 ADDITIONAL INFORMATION AVAILABLE UPON REQUEST This report is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any commodity, futures contract, equity, bond or option contract on any other financial asset. IAF Advisors does not provide investment, financial, tax, or other advice, nor does it operate as a broker-dealer. IAF Advisors does not recommend the purchase or sale of any particular security or securities. Although any statements of fact in this report have been obtained from and are based upon sources that IAF Advisors believes to be reliable, we do not guarantee their accuracy, and any such information may be incomplete or condensed. IAF Advisors, its officers and/or employees, may at any time have a long and/or short position in any commodity, futures contract, equity, bond or option contract on any other financial asset mentioned in this report. All opinions and estimates included in this report constitute IAF Advisors judgment as of the date of this report and are subject to change without notice. There is always a risk of loss in futures trading IAF Advisors Page 5 of 5