RJ's updated NGL Forecast - May 17

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dan_s
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Joined: Fri Apr 23, 2010 8:22 am

RJ's updated NGL Forecast - May 17

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Raymond James Energy Stat: Get Used to High LNG Prices; Bullish LNG Market Shaping up Through at Least 2025

The free financial education website Investopedia.com has a popular “term of the day” daily email that defines and explains topics across the academic and “real” worlds of both corporate and personal finance. We were floored by Investopedia’s selection for May 5, 2022: “liquefied natural gas.” How times have changed. Natural gas was a pseudo-pariah by 2019 and through the early stages of the COVID-19 pandemic as accelerated energy transition narratives ran rampant. However, the subsequent European energy crisis – followed by the Russian invasion of Ukraine – changed the entire discussion around natural gas and LNG.

The BIG Paradigm Shift: Earlier this year, we noted changes in tone from leading energy transition voices such as the IEA and Blackrock, and within the EU taxonomy for sustainable activities itself. While last week’s Energy Stat outlined the bull case for U.S. natural gas prices, today’s report will take a more global approach by studying LNG markets.

In today's Energy Stat, we:
1) provide context around the global LNG market for the uninitiated;
2) update our readers on the status of the European natural gas market and LNG’s role in solving Europe’s energy woes;
3) describe the global LNG supply/demand picture via our own model;
4) outline the impressive commercial momentum for U.S. LNG export projects (and the risks that remain); and
5) revisit the implications of higher U.S. LNG exports on U.S. natural gas prices.
We conclude with ways to continue to play the natural gas theme. We like to highlight “disruptive” themes – today we highlight a “critical” one, and one where U.S. companies and stocks in particular have the potential to both do some good and make a buck at the same time.

Where do we see the global LNG market growing? Three phases.

#1: Obvious short-term (now-to-2025) supply gap. In aggregate, the table to the right suggests that total supply has lagged total demand since at least last year, and that similar levels of import/export mismatches are expected to continue into the 2025 timeframe, when the U.S. and Qatar expect to add healthy capacity. See the 2019-2025 global LNG market summary table on page 5 for more details.

#2: Post-2025 – ideally, another ramp in U.S. LNG exports.

#3: Long-term structural growth in gas demand drives LNG trade.
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MY TAKE: There has been a significant change in the U.S. natural gas market that also impacts NGL supply/demand and prices. If you want to read the full RJ report, send me an email: dmsteffens@comcast.net

I will be attending the Houston luncheon at Fleming's Prime Steakhouse: 2405 West Alabama St., Houston, Texas 77098. EPG members are invited to attend. It starts at noon.
Dan Steffens
Energy Prospectus Group
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