I just looked at the NYMEX strip for Henry Hub natural gas contracts.
Starting with the NOV24 contract all of the contracts are over $3.00/MMBtu and DEC24, JAN25 and FEB 25 are all over $3.50/MMBtu.
If the three big LNG export facilities expected to come online in the next three quarters actually do ramp up, the U.S. natural gas market will tighten very quickly. The surge in NGL export capacity last year is what pushed propane prices to a 16 month high a few weeks ago. 6 Bcfpd more LNG capacity could do the same for natural gas prices.
Hope for the Gassers
Hope for the Gassers
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Hope for the Gassers
Barron's: Natural Gas Prices Won’t Stay Low for Long. An Export Boom Is Coming.
Natural-gas prices dipped to the lowest levels since the pandemic this winter due to a supply glut and warm weather, but that could be about to change.
Analysts believe prices have bottomed for the year. Natural gas futures were about $1.70 per million British thermal units, or MMBtu, Monday, up from a low of $1.58 in February. Prices should rise in 2025 as production falls and demand grows.
Looking further out, demand is expected to pick up as natural gas exports increase, in the form of liquefied natural gas to Europe and Asia and through pipelines to Mexico. The commodity will continue to replace coal in the U.S., as it is phased out. And the expectations for more electricity demand from big tech’s power-hungry data centers for cloud computing and artificial intelligence means natural gas could have a bigger role as the green energy transition works to find a fuel that can function as reliably and abundantly around the clock.
Exports are a big swing factor for U.S. natural-gas prices. Gas prices fell earlier this year when President Joe Biden announced a temporary pause on pending decisions on liquefied natural gas exports, while the administration reviews whether more exports are in the public interest. But already approved projects will result in a near doubling of exports by 2028 from 2023 levels. The pause in approvals could affect projects three to four years from now. < The "Biden Pause" has no impact on LNG export facilities coming online in 2024 and 2025.
Shell recently did a study on LNG, Chief Executive Wael Sawan said Monday at the annual energy conference CERAWeek by S&P Global.
“Today, [LNG is] about 13% of overall gas sales. We see it growing to 20% in the coming 15 to 20 years, and we see a lot of that growth coming particularly in Asia,” due to coal switching and demand from countries where there is gas infrastructure and the potential for a decline in local reserves, he said.
By 2040, Sawan said there could be 50%-plus growth in the global LNG market from current levels. “You’ll have supply coming out of the United States, and supply coming out of Qatar. Those are the two big giants in that space for now, depending on where the [Biden] administration goes with the long-term LNG pause.”
Energy Secretary Jennifer Granholm also spoke at CERAWeek. She told the energy industry the review of future exports shouldn’t disrupt current plans for LNG.
The U.S. currently exports 14 billion cubic feet a day of LNG, Granholm said. The U.S. also has a lot more LNG capability under construction or authorized, but without final investment decisions. “This pause does not touch any of that. This is just a pause to see what the future should bring,” she said.
While the low prices are now positive for gas consumers, for investors, the stocks of gas producing companies have languished.
“It’s so bad, it’s getting good,” said Daniel Pickering, chief investment officer at Pickering Energy Partners.
Pickering said the producers he likes—EQT, Antero Resources, and Chesapeake Energy, soon to merge with Southwestern Energy—have all announced plans to curb production since gas prices fell to lows in February. “The production is going down. Price hasn’t really responded yet,” said Pickering. But he expects that to change.
The U.S. Energy Department is expecting production to fall from 103.8 billion cubic feet a day this year to 103.3 billion in 2025, the first annual decline since 2020.
Storage levels are already extraordinarily high. “The data is stark. It’s unbelievable that we’re almost 40% above the 5-year average for gas in storage for this time of year,” said John Kilduff, partner at Again Capital.
Investors are waiting to see if prices recover before buying the gas producers, Pickering said. That could take some time.
RBC Capital Markets expects natural-gas prices to get back above $2 per MMBtu as the year progresses, and reach an average $3 per MMBtu or more by the end of the year. < This agrees with my forecast and the NYMEX strip shows the NOV24 and DEC 24 contracts already over $3.00.
One of the biggest rivals for U.S. gas drillers comes from within the industry itself. Natural gas is a byproduct of oil drilling in the Permian and elsewhere in the U.S., and the oil producers continue to pump oil at near record levels. That means more cheap gas floods an already oversupplied market. < The two large "gassers" in the Sweet 16 (EQT and RRC) have nothing to do with the Permian Basin.
In 2023, the amount of gas associated with oil drilling was about 40% of the total, according to Kilduff. That means a large portion of gas supply isn’t driven by its own fundamentals.
“Low prices are the cure for low prices, but you have the complicating factor with associated gas volumes particularly coming from the Permian because those gas volumes are driven by oil economics, not gas economics,” said Chris Louney, RBC Capital Markets commodities strategist.
Power demand from data centers will also affect the economics. Their power draw is expected to grow from 23 gigawatts in 2023, or just under 5% of overall power demand to 30 gigawatts by 2030, according to S&P Global Commodity Insights. Those facilities need a 24-hour-a-day supply of energy. Natural gas is ideal for that kind of production.
Today’s overabundance of gas is likely to give way to overall U.S. energy shortages in the next three to five years. That’s more evidence that the market has bottomed.
Natural-gas prices dipped to the lowest levels since the pandemic this winter due to a supply glut and warm weather, but that could be about to change.
Analysts believe prices have bottomed for the year. Natural gas futures were about $1.70 per million British thermal units, or MMBtu, Monday, up from a low of $1.58 in February. Prices should rise in 2025 as production falls and demand grows.
Looking further out, demand is expected to pick up as natural gas exports increase, in the form of liquefied natural gas to Europe and Asia and through pipelines to Mexico. The commodity will continue to replace coal in the U.S., as it is phased out. And the expectations for more electricity demand from big tech’s power-hungry data centers for cloud computing and artificial intelligence means natural gas could have a bigger role as the green energy transition works to find a fuel that can function as reliably and abundantly around the clock.
Exports are a big swing factor for U.S. natural-gas prices. Gas prices fell earlier this year when President Joe Biden announced a temporary pause on pending decisions on liquefied natural gas exports, while the administration reviews whether more exports are in the public interest. But already approved projects will result in a near doubling of exports by 2028 from 2023 levels. The pause in approvals could affect projects three to four years from now. < The "Biden Pause" has no impact on LNG export facilities coming online in 2024 and 2025.
Shell recently did a study on LNG, Chief Executive Wael Sawan said Monday at the annual energy conference CERAWeek by S&P Global.
“Today, [LNG is] about 13% of overall gas sales. We see it growing to 20% in the coming 15 to 20 years, and we see a lot of that growth coming particularly in Asia,” due to coal switching and demand from countries where there is gas infrastructure and the potential for a decline in local reserves, he said.
By 2040, Sawan said there could be 50%-plus growth in the global LNG market from current levels. “You’ll have supply coming out of the United States, and supply coming out of Qatar. Those are the two big giants in that space for now, depending on where the [Biden] administration goes with the long-term LNG pause.”
Energy Secretary Jennifer Granholm also spoke at CERAWeek. She told the energy industry the review of future exports shouldn’t disrupt current plans for LNG.
The U.S. currently exports 14 billion cubic feet a day of LNG, Granholm said. The U.S. also has a lot more LNG capability under construction or authorized, but without final investment decisions. “This pause does not touch any of that. This is just a pause to see what the future should bring,” she said.
While the low prices are now positive for gas consumers, for investors, the stocks of gas producing companies have languished.
“It’s so bad, it’s getting good,” said Daniel Pickering, chief investment officer at Pickering Energy Partners.
Pickering said the producers he likes—EQT, Antero Resources, and Chesapeake Energy, soon to merge with Southwestern Energy—have all announced plans to curb production since gas prices fell to lows in February. “The production is going down. Price hasn’t really responded yet,” said Pickering. But he expects that to change.
The U.S. Energy Department is expecting production to fall from 103.8 billion cubic feet a day this year to 103.3 billion in 2025, the first annual decline since 2020.
Storage levels are already extraordinarily high. “The data is stark. It’s unbelievable that we’re almost 40% above the 5-year average for gas in storage for this time of year,” said John Kilduff, partner at Again Capital.
Investors are waiting to see if prices recover before buying the gas producers, Pickering said. That could take some time.
RBC Capital Markets expects natural-gas prices to get back above $2 per MMBtu as the year progresses, and reach an average $3 per MMBtu or more by the end of the year. < This agrees with my forecast and the NYMEX strip shows the NOV24 and DEC 24 contracts already over $3.00.
One of the biggest rivals for U.S. gas drillers comes from within the industry itself. Natural gas is a byproduct of oil drilling in the Permian and elsewhere in the U.S., and the oil producers continue to pump oil at near record levels. That means more cheap gas floods an already oversupplied market. < The two large "gassers" in the Sweet 16 (EQT and RRC) have nothing to do with the Permian Basin.
In 2023, the amount of gas associated with oil drilling was about 40% of the total, according to Kilduff. That means a large portion of gas supply isn’t driven by its own fundamentals.
“Low prices are the cure for low prices, but you have the complicating factor with associated gas volumes particularly coming from the Permian because those gas volumes are driven by oil economics, not gas economics,” said Chris Louney, RBC Capital Markets commodities strategist.
Power demand from data centers will also affect the economics. Their power draw is expected to grow from 23 gigawatts in 2023, or just under 5% of overall power demand to 30 gigawatts by 2030, according to S&P Global Commodity Insights. Those facilities need a 24-hour-a-day supply of energy. Natural gas is ideal for that kind of production.
Today’s overabundance of gas is likely to give way to overall U.S. energy shortages in the next three to five years. That’s more evidence that the market has bottomed.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group