Energy Prospectus

The JAN25 NYMEX contract was trading at $3.639 at the time of this post, up 7.85% since yesterday's closing price. This is a short covering rally since there are only a few days left before the FEB25 becomes the front month.

Trading Economic:
"US natural gas futures extended their recent rise to $3.6 per MMBtu on Thursday, the highest in over one year, as bets of stronger global LNG demand magnified robust domestic consumption. Data from the EIA showed that utilities withdrew more than 100 billion cubic feet of natural gas from storage for a second straight week, extending an anticipated withdrawal season. Also, uncertainty on whether Europe will continue to receive Russian gas through Ukraine drove investors to take long LNG positions as EU members search for alternative gas sources. This raises demand for US LNG at the turn of the US presidency, with President-elect Trump pledging to issue more LNG export permits, driving firms to favor more profitable exports instead of cheaper gas sales domestically due to the ample domestic supply. In the meantime, another report from the EIA showed that domestic natural gas consumption is set to break a new record in 2024, largely due to higher demand from the electric power sector."

HFI Research:
Natural Gas Has More Upside As Weather Models Turn Bullish
"Two days ago, we saw a major shift in the ECWMF-EPS 15-day outlook. The Alaska ridge returned, which foreshadows colder than normal weather in the East Coast. Fast forwarding to today, ECMWF-EPS still shows a very bullish setup going into early January."

HFI now expects HH gas to spike to $4.25 in January.

Today's closing prices of NGas futures on the NYMEX Strip:
2025
Q1: $3.255
Q2: $2.979
Q3: $3.341
Q4: $3.776

If NGas in storage ends the winter 2024/2025 heating season several hundred Bcf below the 5-year average at the end of March 2025, the stage is set for a Bidding War in Q3 2025 between the utilities and the LNG exporters that will push gas prices MUCH HIGHER. 2025 could be a repeat of 2022. In August 2022 the front month contract (SEP22) spiked to $9.46/MMBtu and NGas stayed over $6.00 through November 2022. The winter of 2022/2023 was one of the warmest winters on record.

Reuters reported that natural gas prices in Asia, Europe, and North America have surged by 30% to 50% so far in 2024, and are expected to continue climbing over the coming months. The forecast for colder weather is expected to drive higher heating demand in key consumer regions, further boosting gas prices. This trend is anticipated to keep gas market sentiment bullish until the winter season ends, with prices likely to remain high well into 2025. The rapid restocking of declining gas inventories in Europe and Asia is also expected to spur strong gas demand, even if temperatures moderate. This will ensure that gas prices have little room to decline. The high and rising gas prices are expected to increase power costs across key global markets, potentially hampering economic growth in China, Europe, and other regions, and raising concerns about inflation.

Colder-than-average temperatures are forecast for major gas-consuming areas, including China, Japan, and mainland Europe. For instance, Seoul, South Korea, is expected to see average December temperatures of around -2.17°C, compared to a long-term average of -0.7°C. Similar below-normal temperatures are predicted for Shanghai, Tokyo, and Hong Kong, which will increase the demand for heating and accelerate the consumption of natural gas and coal. In Europe, gas inventories have already seen a significant decline. Between October 1 and the end of November, cumulative gas inventories in Germany, the Netherlands, Belgium, and France fell by 11%, compared to relatively flat inventories in 2023 and a 3.5% increase in 2022. This rapid drawdown, coupled with the need to rebuild stocks, will put additional pressure on gas prices. In the United States, while natural gas inventories are currently the highest in over five years, they are on the brink of the traditional draw-down period, which typically sees a 9% reduction in stockpiles over the final five weeks of the year. This will further tighten gas supplies and support market sentiment.

Demand for U.S. natural gas remains HIGH and exports of U.S. LNG should remain near capacity, setting records. LNG cargos are now getting prices over $13/MMBtu in Europe and Asia.