Phil Flynn's take on Natural Gas Prices - June 8 AM
Posted: Wed Jun 08, 2022 12:27 pm
Before the markets opened this morning, Phil wrote this. My comments in blue.
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Natural gas pulled back a bit yesterday but fundamentally is still wildly bullish, yet maybe some rays of hope for price ease later this year as long as summer is mild. < 10-day forecast is very bullish for natural gas demand as HOT temps spread across the South where ngas fired power plants will need to run at maximum capacity.
EBW Analytics reports that natural gas reached as high as $9.544/MMBtu intraday Tuesday as the June forecast turned hotter and production dipped. Further gains remain likely ahead, but another test of technical support may be possible first. Searing heat is lifting ERCOT loads to record highs this week, with power sector gas burns likely to jump 3.6 Bcf/d on soaring cooling demand next week. Production remains a critical market metric over the next 30-45 days, with upside price pressure likely to build until evidence of rising supply materializes. The end-of-October storage outlook faded to just 3.3 Tcf over the past week, furthering the bullish seasonal fundamental outlook. < This is what is behind the Bidding War for natural gas supply. The 5-year average storage level for the beginning of the winter heating season (mid-Nov) is 3,735 Bcf. Refilling storage is not optional. Utilities will remain in a bidding war with the LNG exporters for as much physical deliveries they can get ASAP.
As prices clear $9/MMBtu, however, prospective price risks may lean less asymmetrically bullish.
Biden is making good on his pledge to supply Europe with LNG at the expense of Asia. < Old Joe has nothing to do with this. High LNG prices in Europe and Asia are keeping LNG exports at capacity of ~13 Bcfpd.
The Energy Information Administration (EIA) reported that during the first four months of 2022, the United States exported 74% of its liquefied natural gas (LNG) to Europe, compared with an annual average of 34% last year, according to our recently released Natural Gas Monthly and EIA estimates for April 2022. In 2020 and 2021, Asia had been the main destination for U.S. LNG exports, accounting for almost half of the total exports.
U.S. LNG exports averaged 11.5 billion cubic feet per day (Bcf/d) during the first four months of 2022, an 18% increase compared with the 2021 annual average. The increase in U.S. LNG exports was driven by additional export capacity at Sabine Pass (Train 6) and Calcasieu Pass (first five blocks) that came online this year and by high LNG demand, particularly in Europe.
Since December 2021, the European Union (E.U.) and the United Kingdom have been importing record-high levels of LNG, primarily because of low natural gas storage inventories. High spot natural gas prices at the European trading hubs incentivized global LNG market participants with destination flexibility in their contracts to deliver more LNG supplies to Europe. Additional LNG imports in Europe and a mild winter offset lower natural gas pipeline imports from Russia.
The United States became the largest LNG supplier to the E.U. and United Kingdom in 2021, accounting for 26% of total imports. In the first four months of 2022, LNG imports from the United States to the E.U. and the United Kingdom have more than tripled compared with 2021, averaging 7.3 Bcf/d and accounting for 49% of total imports, according to data from CEDIGAZ. LNG imports from Russia and Qatar accounted for 14% each (2.1 Bcf/d).
During the first four months of 2022, U.S. LNG exports to Asia declined by 51%, averaging 2.3 Bcf/d compared with 4.6 Bcf/d (annual average) in 2021. U.S. LNG exports to South Korea and Japan also declined by 0.6 Bcf/d and 0.5 Bcf/d, respectively. China and South Korea were top destinations for U.S. LNG exports in 2021. This year, however, China received only six LNG cargoes from the United States in January–April 2022 (0.2 Bcf/d, compared with 1.2 Bcf/d in 2021) because of pandemic-related lockdown measures, as well as a mild winter and high LNG spot prices, reduced demand for spot LNG imports.
Most recent LNG prices I can find are $25.04/MMBtu in Europe and $22.57/MMBtu in Japan/Korea.
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Natural gas pulled back a bit yesterday but fundamentally is still wildly bullish, yet maybe some rays of hope for price ease later this year as long as summer is mild. < 10-day forecast is very bullish for natural gas demand as HOT temps spread across the South where ngas fired power plants will need to run at maximum capacity.
EBW Analytics reports that natural gas reached as high as $9.544/MMBtu intraday Tuesday as the June forecast turned hotter and production dipped. Further gains remain likely ahead, but another test of technical support may be possible first. Searing heat is lifting ERCOT loads to record highs this week, with power sector gas burns likely to jump 3.6 Bcf/d on soaring cooling demand next week. Production remains a critical market metric over the next 30-45 days, with upside price pressure likely to build until evidence of rising supply materializes. The end-of-October storage outlook faded to just 3.3 Tcf over the past week, furthering the bullish seasonal fundamental outlook. < This is what is behind the Bidding War for natural gas supply. The 5-year average storage level for the beginning of the winter heating season (mid-Nov) is 3,735 Bcf. Refilling storage is not optional. Utilities will remain in a bidding war with the LNG exporters for as much physical deliveries they can get ASAP.
As prices clear $9/MMBtu, however, prospective price risks may lean less asymmetrically bullish.
Biden is making good on his pledge to supply Europe with LNG at the expense of Asia. < Old Joe has nothing to do with this. High LNG prices in Europe and Asia are keeping LNG exports at capacity of ~13 Bcfpd.
The Energy Information Administration (EIA) reported that during the first four months of 2022, the United States exported 74% of its liquefied natural gas (LNG) to Europe, compared with an annual average of 34% last year, according to our recently released Natural Gas Monthly and EIA estimates for April 2022. In 2020 and 2021, Asia had been the main destination for U.S. LNG exports, accounting for almost half of the total exports.
U.S. LNG exports averaged 11.5 billion cubic feet per day (Bcf/d) during the first four months of 2022, an 18% increase compared with the 2021 annual average. The increase in U.S. LNG exports was driven by additional export capacity at Sabine Pass (Train 6) and Calcasieu Pass (first five blocks) that came online this year and by high LNG demand, particularly in Europe.
Since December 2021, the European Union (E.U.) and the United Kingdom have been importing record-high levels of LNG, primarily because of low natural gas storage inventories. High spot natural gas prices at the European trading hubs incentivized global LNG market participants with destination flexibility in their contracts to deliver more LNG supplies to Europe. Additional LNG imports in Europe and a mild winter offset lower natural gas pipeline imports from Russia.
The United States became the largest LNG supplier to the E.U. and United Kingdom in 2021, accounting for 26% of total imports. In the first four months of 2022, LNG imports from the United States to the E.U. and the United Kingdom have more than tripled compared with 2021, averaging 7.3 Bcf/d and accounting for 49% of total imports, according to data from CEDIGAZ. LNG imports from Russia and Qatar accounted for 14% each (2.1 Bcf/d).
During the first four months of 2022, U.S. LNG exports to Asia declined by 51%, averaging 2.3 Bcf/d compared with 4.6 Bcf/d (annual average) in 2021. U.S. LNG exports to South Korea and Japan also declined by 0.6 Bcf/d and 0.5 Bcf/d, respectively. China and South Korea were top destinations for U.S. LNG exports in 2021. This year, however, China received only six LNG cargoes from the United States in January–April 2022 (0.2 Bcf/d, compared with 1.2 Bcf/d in 2021) because of pandemic-related lockdown measures, as well as a mild winter and high LNG spot prices, reduced demand for spot LNG imports.
Most recent LNG prices I can find are $25.04/MMBtu in Europe and $22.57/MMBtu in Japan/Korea.