Doomberg Cogent Analysis-Biden and Nat Gas

[ChuckGeb]

Excepts from the latest piece from the coop

“In a similar vein, we recently argued that the Biden administration’s move to pause new LNG export approvals would result in a short-term sugar high for the US economy, adding to other energy tailwinds that should keep the country from falling into a recession before the 2024 presidential elections. In the days since the LNG announcement was made, front-month contract prices at Henry Hub have collapsed some 25% and are down nearly 40% from their January highs, proving the signaling power of the presidential action, however cynical it might have been. As US GDP and jobs report prints keep coming in hotter than many advocates in the pro-recession camp expect, they are finding increasingly creative ways to dismiss the data as fraudulent……..

Heat, electricity, manufacturing, and food—the utility of natural gas is ubiquitous.

Cheap natural gas is the bedrock of the US economy. It explains much of the country’s economic resilience and highlights the dangerous game the Biden administration is playing with its LNG export pause gambit. By cratering short-term US natural gas prices, dependence on the fuel could move from an advantage to a risk—the commodity does not immaculately appear, after all, and must be drilled for by profit-seeking companies. Take away those profits and the market will eventually respond, curtailing production just as the country needs supply more than ever. When the whiplash in pricing inevitably arrives, it could be violent, leading to a rather serious economic crisis.

The Biden administration is gambling such troubles will not materialize until well after the upcoming election, a deeply contemptuous maneuver. As analysts, we can and should acknowledge both realities: the move is bullish for the US economy in the short term and a particularly dangerous decision in the long.”

[dan_s]

Trading Economic:
"US natural gas futures fell to $2.0/MMBtu, the lowest since April 2023 amid the gradual increase in production after gas wells resumed operations following the severe cold in mid-January. Furthermore, the forecasted demand for this week seems lower than previously expected. Meteorological predictions indicate that temperatures will remain above average until February 13, returning to normal levels from February 15-21. Simultaneously, gas supply to the country's LNG export facilities remains restricted due to technical difficulties at Freeport LNG's Texas export plant. US LNG feedgas is unlikely to return to record levels until mid-February when Freeport is expected to regain full power."

Freeport returning to full export capacity at the same time winter weather returns to the U.S. and to Europe, MIGHT help get natural gas prices back to $2.50.

Take a look at a 10-year chart here: https://tradingeconomics.com/commodity/natural-gas

Note that:
> The percentage swings in HH natural gas prices are much larger than oil price swings. They often happen when you least expect it.
> All of the big price increases are outside of the first quarter. That's because the utilities that bring natural gas to your home or business are out of the futures market when they believe they have enough gas in storage to meet space heating demand.
> The front of the NYMEX strip for HH gas is so low now because the Paper Traders hold too many long contracts. They cannot take physical delivery, so they must close those contracts before they expire. The utilities are in great shape because they can take advantage of the situation.
> This is good news for consumers because it should keep our electricity prices lower for longer.
> If natural gas prices do remain below $2.50, I expect the large-cap gassers to reduce their well completions.