Divergence - Nat gas vs. producers

[Finn352]

What was happening today, nat gas futures down 9% but gas producers (AR, CRK, EQT, EOG, RRC etc.) all up substantially..
Shows again that markets anticipate turnarounds, waiting for the gas price to go up first is not a good strategy.
Was it just the EQT CEO comments on CNBC? And how long can this divergence continue..?

From Seeking Alpha:

The natural gas (NG1:COM) market is currently oversupplied, said Toby Rice, EQT Corp. (EQT) CEO.

During a CNBC interview, he said that the market has about 600 BCF (billion cubic feet) of extra natural gas and storage than the five-year average of about 1,711 BCF at 2,333 BCF.

Rice also said that two catalysts he sees for natural gas demand are power demand and summer weather.

He spoke about the “exciting emerging market” of power demand, and how “this AI revolution is only going to take place with affordable, reliable clean energy.”

AI power demand is estimated to reach 75 gigawatts, the equivalent of meeting enough power to power an additional 15 New York Cities, he said. “This is a massive opportunity here.”

Those 75 gigawatts of new power demand would amount to an incremental 13 BCF a day of natural gas.

In addition, he said that the market in the future will call for significantly greater amounts of natural gas, whether through demand from liquified natural gas growth -- an incremental 15 BCF a day, or a 15% increase in natural gas demand today -- or through powered power generation, which could be greater than 15 BCF a day, he said.

“We need to ensure that we have the ability to get energy infrastructure built in this country, whether it's a pipeline or an electric transmission line,” he said. “We need to have the regulatory support to be able to thread the needle and make these big projects real.”

[dan_s]

Another thing to keep in mind is that demand for U.S. natural gas, including exports is approximately 105 Bcf per day over the course of a year. The gas price is down today because the front month contract MAY24 expires this week. JUN24, which will be the front month contract next week, closed at $1.97 today and JUL24 closed at $2.32. By Q4 U.S. ngas should be firmly over $2.50 unless we have a mild summer.

105 X 366 days = 38.43 TRILLION cubic feet of U.S. gas, so a surplus of 0.600 trillion doesn't seem that difficult to work off.

The national weather service is forecasting a hot summer for the U.S. and an active hurricane season.

EQT does have some good hedges in place that should keep them free cash flow positive in 2024. If their realized natural gas prices is $2.50/mcf in 2025, EQT will generate over $4 billion of operating cash flow in 2025. Beyond the next 18 months, the outlook for EQT is VERY BULLISH.

If you want exposure to natural gas, the safest bets are BSM, KRP an CTRA in our High Yield Income Portfolio. InPlay Oil, will also get a nice revenue boost from a rebound in Canadian natural gas prices and it pays a very nice dividend.

[Fraser921]

I think the market had a sigh of relief with Range and AR. In regards to RRC they have very good hedges. I also think there is short covering. A one day divergence is just that, a one day divergence not a major turn around

Prices are horrid and I dont know understand why producers are over producing rather than leaving it in the ground

Key point is not what the future may hold, its 600 BCF (billion cubic feet) of extra natural gas and storage than the five-year average of about 1,711 BCF at 2,333 BCF

What good is Ai demand if you don't have ng generating plants and a way to transport the electricity to the users. I don't see politicians letting up on fighting pipelines and people with a NIMBY mentality

[dan_s]

We have lots of ngas fired power plants that will be running 24/7 when summer heat arrives, which starts next week. This is the same across the Southeast quarter of the country.