NatGasWeather.com Daily Report

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1 NatGasWeather.com Daily Report Issue Time: 4:55 am EDT Thursday, March 16 th, Day Weather Summary (Mar nd ): Temperatures will remain a bit cold today over the eastern US, although with conditions beginning to moderate after the recent cold blast. With overnight lows again well below freezing, nat gas demand will remain strong. Over the West and South, strong high pressure will continue to dominate with highs of 60s to 90s. A fast-moving weather system will impact the Great Lakes and East Friday into Sunday, followed by warming Monday into Tuesday. Although, another cold blast will arrive Tue-Wed of next week with a return to strong demand Day Outlook (March th ): Swings in temperatures are expected over the western and northeastern US as weather systems track across with rain and snow, but overall, averaging out near to slightly cooler than normal. Over the central and southern US, high pressure is expected to bring warm to hot conditions. Summary: Slightly Cool NE US & West Coast. Warm/Hot Southern & Central US. Nat Gas Demand Next 15 Days: MODERATE to HIGH Days 1-7, MODERATE Days Weather Market Threat: MODERATE-LOW Nat Gas Flux Index: -16 (Bullish) Weather Discussion & Market Effect: April 17 nat gas futures rallied back above $3 briefly Wednesday, sold back under, but still maintained minor gains. Today s EIA weekly storage report is expected to bring a draw on supplies of -56 Bcf by national survey averages, lighter than the 5-year average of -85 Bcf. It was warmer than normal over much of the country apart from the cooler Northeast and portions of the West. Our algorithm predicts a draw of -53 Bcf, to the slightly bearish side. Regarding the latest weather data, no major changes as numerous weather systems and cold blasts impact the US through next week, resulting in swings in demand between moderate and high. However, a milder, more seasonal, pattern is still expected after March 25 th where only modest late season heating or light early season cooling demand is expected. Until then, scattered snow showers and cold conditions remain over the East to drive relatively strong heating demand as overnight lows again drop well below freezing. A weather system will be quick to follow over the East Saturday into Sunday, while over the Southwest, Texas, and the S. Plains, afternoon highs are expected to reach the 80s to lower 90s. A brief milder break late Sunday through early Tuesday over much of the country will ease national nat gas demand back to near normal ahead of another weather system and associated cold blast arriving across the Midwest and Northeast during the middle of next week, March 22-23, where national demand will increase back above normal. Thereafter, an active but more seasonal/milder pattern is favored the last week of March as weather systems track across the country, just with limited amounts of subfreezing temperatures. It s important to note the official draw season is coming to a rapid close as the next four EIA weekly reports after today based on the 5-year average line up as -21, -27, -13, and +12. Thus, just marginally cool conditions should be enough to gradually eat away at surpluses due to the background S/D environment remaining tight. We expect how much nat gas use occurs the last week of March and the first weeks of April under more seasonal conditions will be very telling. Essentially, if mild early spring conditions still result in reductions in surpluses, that would be a sign of a rather bullish backdrop going into the hot months. It will then be up to summer heat to cash in, unlike this mild winter season. Prices remain around 5 under $3 in overnight trade, so it will be of considerable interest to see how they react after today s storage report and whether they accelerate lower from this area, or rally to regain $3.

2 Selected Weather Images - Thursday: Snow/Cold Lingers E. Warm W & S 8-15 Day: Slightly Cool CA & NE. Warm S & C US. EIA Weekly Report Temperatures vs Normal Weekend Set Up: System NE. Mild/Warm Rest US Cold Blast March rd For Another Swing To Stronger Than Normal Nat Gas Demand Active Pattern March st, But Wx Systems Fail To Tap Cold Air, Thus Mainly Mild to Cool Overall. Nat Gas Commentary by Prof of Finance Andrea P: Natural gas prices increased yesterday with April'17 up 5 to settle at $ The entire forward curve was up with the front outperforming the back end after a relatively bullish S/D balances. US lower 48 production was around 71 bcf, the highest reading of the week, 0.4 bcf more than last week. But power burns over the last two days were stronger weather adjusted, especially on Tuesday when they were upward revised at 25.8 bcf, while reaching near 25 bcf Wednesday. LNG exports through Sabine were stable and close to the highs at 2.4 bcf. For today s EIA storage number, I expect a -59 bcf draw, just below ICE swap at -57 bcf. I think that the overall low production along with good power burns could determine a tight number also in presence of lower LNG export.

3 EIA Weekly Nat Gas Storage Report Outlook Table: EIA Weekly Report Week 1 March 16 th (May 3-9 th ) Week 2 March 23 rd (May10-17 th ) Week 3 March 30 th (May18-24 th ) NatGasWeather.com Forecast -53 Bcf -136 to -152 Bcf Bcf 5-Year Average -85 Bcf -21 Bcf -27 Bcf Compared to 5-Year Ave Smaller Than Normal Draw Much Larger Than Normal Draw Slightly Larger Than Normal Draw Recent Trend No Trend MUCH Larger Draw No Trend BULLISH (cold) NEUTRAL (warm) BEARISH Notes: Last week s EIA storage report showed a draw on supplies of -68 Bcf, bullish to market expectations around -61 Bcf, while we were quite close with our forecast at -66 Bcf. This week s draw will again be lighter than the 5-year average to increase surpluses in supplies to near +400 Bcf. The following two builds will be factoring much colder temperatures, leading to a couple stronger than normal draws to decrease surpluses back to near +250 Bcf. Monthly Temperature Anomalies March 1-15 th Temperature Forecast vs Normal Forecast: 15 CDD+652 HDD 30-yr Ave: Total CDD/HDD vs Normal %

4 Temperature (HDD & CDD) vs Normal Forecasts Next 3 Months April May June Forecast: 35 CDD+233 HDD yr Ave: Total CDD/HDD vs Normal +4% Forecast: 135 CDD HDD yr Ave: Total CDD/HDD vs Normal +1% Forecast: 265 CDD + 25 HDD yr Ave: 232 CDD + 33 HDD 265 Total CDD/HDD vs Normal +6% Observed Previous 3-Month Temperature vs Normal December January February Total 873 HDD & 13 CDD yr Ave ( ) 896 Nat Gas HDD/CDD vs Normal -1% Total 856 HDD & 7 CDD yr Ave ( ) 974 Nat Gas HDD/CDD vs Normal -11% Total 609 HDD & 10 CDD yr Ave ( ) 794 Nat Gas HDD/CDD vs Normal -22%

5 End of Withdraw Season Supplies (April 5 th ): 2016/17 (NatGasWeather.com Forecast) 2015/16 (Warm Last Winter) 2013/14 (Cold Winter) 5-Year Average Forecast 2016/17 HDD Totals: October 1 st April 15 th (Heating Season) December -February (Winter Season) 1,989 Bcf 2,468 Bcf 827 Bcf 1,606 Bcf 3,830 vs 4, Year Ave 2,319 vs 2, Year Ave

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7 Current Nat Gas Flux Index: -16 Nat Gas Flux Strategies (requires numerous consecutive weeks): Nat Gas Flux -10 to -40: Bullish - Buy Moderate to Strong Sell-offs Nat Gas Flux -9 to +9: Neutral - Expect Choppy Trade or Potential Price Reversal Nat Gas Flux +10 to +40: Bearish - Sell Moderate Price Rallies We developed the Nat Gas Flux Index to evaluate price movements in the natural gas markets based on changes in supply/demand dynamics. Below is a description of our proprietary Nat Gas Flux Index and how to interpret it based on the current market situation. How to read the Nat Gas Flux: Blue Nat Gas Flux weekly bars above zero (black line) indicate structural loosening, which our research has shown to historically pressure prices. When the Nat Gas Flux weekly blue bars are below zero, prices often find support. The orange line represents the price of the front month nat gas futures contract. You will clearly see when blue bars are above zero, such as during 2014 and 2015, prices were pressured and steadily fell. You will note a short-term rally in prices occurred during Dec 2015, which was based on a couple strong polar outbreaks that intimidated the market, but once they passed, prices sold back off as Nat Gas Flux remained above zero. A reversal in price occurred in March/April 2016 just as Nat Gas Flux flipped below zero, where it has remained through summer. The updated index for March 10 th has it remaining well below zero at -16 (furthest right blue bar on image). That s not to say, there can t or won t be periods where prices sell-off for weeks at a time when the flux is below 0, especially after strong rallies or during mild winter temperatures, much like what occurred in recent weeks. It should be considered a weekly index, not daily, and will be updated on Friday's. All forecasts and content within natgasweather.com reports are use at your own risk. Users assume all liabilities. Content is not an endorsement to buy or sell stocks, options, futures, ETF's, or any financial instrument.