Natural Gas Price Forecast - Sept 21

[dan_s]

Raymond James published a new report this morning focused primarily on the global LNG market.

This caught my eye:
"Food for thought - should we still be bullish on U.S. gas prices? As we've argued previously, the North American market projects to get
substantially tighter in 2021, propping up natural gas prices. The EIA is in agreement, raising its 2021 natural gas price forecast to $3.19/MMbtu
in the September STEO. In our view, the gas price move could be perhaps even beyond what we’ve seen in strip pricing thus far, and, potentially,
closer to our call for Henry Hub exiting 2021 at $4/MMBtu. In our prior natural gas price forecast analysis – which we will update shortly after
quarter’s end – based on strip prices at the time (WTI crude and Henry Hub gas prices of $35 and $2.01), U.S. gas inventories were tracking to end
this year above 4 Tcf; however, they would then be set to fall significantly below acceptable levels in 2021 at 2.2 Tcf – down a shocking 2,000 Bcf
y/y thanks to massive 2021 U.S. gas supply declines. It is important to note that this is purely theoretical. We believe there is little chance that
gas in storage will fall that much in a single year. Moreover, as we noted regarding our U.S. LNG export assumptions for 2020, recent trends have
probably slightly exceeded those of our prior model for 2020, only making the natural gas market more bullish. More to the point, with the typical
rule of thumb in the domestic natural gas market being ~$0.25/MMBtu change in annual average prices for each ~1 Bcf/d of demand sensitivity,
this tells us that there’s plenty of room for our bullish gas price call to hold directionally even if LNG exports modestly disappoints in 2021."

MY TAKE:
> The only thing holding down HH gas prices today is the high level of U.S. gas in storage. That will change quickly in mid-Nov when the winter heating season arrives.
> Gas in storage falling below 1,500 Bcf by the end of March, 2021 will push the NYMEX strip a lot higher.
> If storage refills are below average in Q2 2021, natural gas strip prices for the 2021-2022 winter will go over $4.00/MMBtu. A hot summer could push them over $5.00.
> EIA's U.S. natural gas production forecast for 2021 is actually below what U.S. domestic consumption was in 2019.
> Higher domestic gas prices will be needed to drive out LNG exports. We may need to bring back coal fired power plants.
> The U.S. simply cannot begin a winter with less than 3,000 Bcf in storage because it would set up dangerous outages of a critical heating fuel even with a normal winter.

If you'd like to read the Raymond James report, send me an email: dmsteffens@comcast.net