Energy Prospectus

Very bullish for natural gas prices.

Working gas in storage was 3,209 Bcf as of Friday, July 12, 2024, according to EIA estimates.
This represents a net increase of 10 Bcf from the previous week. < Compared to 65 Bcf last week and 5-yr average build of 40 Bcf.
Stocks were 250 Bcf higher than last year at this time and 465 Bcf above the five-year average of 2,744 Bcf.
At 3,209 Bcf, total working gas is above the five-year historical range.

MY GUESS: The previous week's 65 Bcf may have been an error and/or there must have been a lot of gas wells shut-in due to the hurricane.

When I worked at Hess for 18 years, we would shut-in gas wells during the summer to avoid selling gas a low prices. Letting gas wells build up pressure during the summer to be able to sell more gas at higher prices during the winter is wise business.

I do expect most of our model portfolio companies to report higher realized gas prices in Q2 than what I used in my forecasts because HH ngas prices were 10 to 15 cents higher than my Q2 ngas assumption of $2.25/mcf.

EIA "Short Term Energy Outlook" report dated July 3, 2024:
"We forecast the Henry Hub natural gas spot price will average almost $2.90 per million British thermal units (MMBtu) in 2H24, up from $2.10/MMBtu in 1H24. Natural gas prices fell in early 2024 because of mild winter weather that reduced demand for natural gas for space heating. However, low prices reduced natural gas-directed drilling and led producers to curtail some production, and we expect dry production of U.S. natural gas in 2H24 to remain near 104 billion cubic feet per day (Bcf/d) compared with a record of more than 106 Bcf/d in December 2023.

For my July newsletter, I will probably lower my Q3 2024 HH ngas price to $2.25 and keep my Q4 HH ngas price at $3.00. I do expect LNG exports to increase significantly between today and year end. For 2025 I am using $3.50 for HH ngas prices. If all the wild cards fall into place, we should see a Bidding War for ngas supplies in 2H 2025.