As the production levels on regular basis now nearly 2 Bcf/day lower than the highs reached in H1 of 2015, last month's futures contract expiry of $2.033/MMBtu that has encouraged an uptick in natural gas demand.

Lack of winter demand so far in New England-the supply/demand balance is relatively tight on a weather adjusted basis.

Sell calendar strip 2017 and buy calendar strip 2018 With the front four bullet month contracts of the natural gas forward curve primarily influenced by weather and the record-high working gas storage level.

The remainder of calendar strip 2016 still largely influenced by producer hedging-there are still many large natural gas producers with an historically low hedge ratio for 2016-we find a potentially more stable return on investment in the deferred portion of the natural gas curve.

We recommend selling calendar strip 2017 and buying calendar strip 2018 at the current spread of 7.5ȼ/MMBtu.

We target 25ȼ while placing a stop at -5ȼ, as there is a slight risk that under certain conditions the spread could move into backwardation.

There exists less liquidity and bid/offers tend to be wider, but calendar spreads have been trading as a result of the above mentioned producer hedging.

Thus we recommend this trade for those who prefer to bear this risk for a longer period of time.

Moreover, we project that producer hedging activity for 2017 will increase with an E&P community that is largely under-hedged this tenor.

While leaving 2018 under less pressure-few producers venture out more than 18 months on the curve, and when they do it tends to be weighted more heavily in tenors closer to spot.

This spread also allows for the increase in natural gas demand we currently anticipate from power generation, industrial projects, and the increased LNG export capacity while allowing for the current LNG supply glut to clear.