U.S. Natural Gas Market - August 10

[dan_s]

My take is that the U.S. gas market is much tighter than the Wall Street "consensus".
There is no doubt that U.S. gas production is growing and growing fast. However, I think demand is growing even faster. And it should:
> Natural gas is the "clean" hydrocarbon energy
> It is cheap: About a third the price of oil per Btu of energy
> It is abundant: We have centuries of natural gas reserves
> It is getting easier to export each year.

The Wall Street Gang is just starting to get it. Note from Tudor Picker Holt below.

U.S. Natural Gas Recap: Demand outpacing supply to start the 2nd half

Natural gas inventories built 46bcf in-line with expectations (47bcf), but less than 5-yr norms (53bcf). Inventories at a 559bcf (~20%) deficit to 5-yr norms and remain below 5-yr mins.
> Despite US production migrating higher (+350mmcfd w/w), demand has proven resilient due to prolonged warmer-than-normal temperatures.
> Natural gas bears lost some arrows in their quiver after the probability for a winter El Nino has lessened and
> Q4'18 start-up of Corpus Christi Train #1 and Sabine Pass Train #5 (a combined 1.2bcfd of capacity) have been guided to by Cheniere.
Though this likely doesn't translate to incremental demand, it will likely be a boon for sentiment. Simply put, a NE production ramp is still expected, but time is quickly running out to backfill the storage deficit.

The United States will have close to 19 Bcf per day of export capacity by the end of 2020. In addition to several more LNG facilities coming on-line, midstream companies are building more pipelines to Eastern Canada and to Mexico. Mexico's demand for gas is much higher than what we are shipping to them today.

My Opinion: The "Wall Street Herd" will focus on this topic after Labor Day and the Herd can change directions quickly.

[dan_s]

Here is a more detailed explanation of why I am short-term bullish on natural gas prices: https://seekingalpha.com/article/419532 ... ean-prices

Is summary: We are now past the point were it is even remotely possible for storage to get back to the 5-year average before the beginning of the next winter heating season. Based on the calculations made in the article above, storage should be ~400 Bcf below the 5-year average in mid-November. If so, even normal winter weather in December should push the gas price up to $4.00/mcf.

[dan_s]

TPH Morning Report: LNG Export Queue

Cheniere leading the pack on construction schedule, other projects sliding to right

Yesterday, Cheniere announced that they expect 1st LNG from both Corpus Christi Train #1 and Sabine Pass #5 in Q4'18, an incremental 1.2bcfd of capacity. Operational performance runs counter to other queued projects that have either announced delays (Elba Island and Freeport) or are holding to an aggressive schedule (Cameron). Although we don't expect the Q4 start up to translate to 100% utilization by YE, incremental demand likely shows up early Q1'19. Accounting for these revisions, LNG export capacity is expected to grow ~2.2bcfd e/e through 2020. Post 2020 however, US LNG export capacity likely to plateau at ~10.0bcfd as the most recently FID'd project Corpus Christi Train #3 enters service. A potential 25% Chinese tariff on U.S. LNG exports may impede other near-term FIDs, setting up the possibility of an air pocket on LNG export commissioning in the early 2020s.

[dan_s]

Bloomberg: Europe Shows It’s Getting Serious About Buying U.S. LNG

https://www.oilandgas360.com/europe-sho ... ng-u-s-lng