Energy Prospectus

JUN25 is now the front month NYMEX contract. At the time of this post it was trading at $3.38.

On page 4 of The View from Houston newsletter that you should have received in your email early this morning, I discuss why the MAY25 NYMEX contract dipped below $3.00/MMBtu last week.

At the top of page 5 is a chart cut from EQT Corp's (NYSE: EQT) recent slide presentation that shows how tight the U.S. natural gas market is when measured on Days of Demand. EIA's weekly storage report compares gas in U.S. storage locations to the last 5 year average. That information is MISLEADING because demand for U.S. natural gas is MUCH HIGHER than it was five years ago.

Your assignment: Go to the EQT website and pull up their most recent presentation. Go to slide 15 and read the comment at the bottom of the slide. Take just ten minutes to review slides 15-20 carefully to understand why the U.S. natural gas market is going to become EXTREMELY TIGHT by the end of this year.

MY TAKE:
> The Henry Hub natural gas price averaged $3.65/MMBtu during Q1 2025, which was $0.15 higher than what I was using in my forecast models
> I am now using $3.25/MMBtu for Q2 gas prices in my forecasts, which is likely to end up being too conservative.
> To come close to EIA's current natural gas price forecast of $4.30 for all 2025, HH natural gas prices will need to average over $4.50 for 2H 2025. As you can see on the top of page two in the newsletter, I am using more "conservative" gas prices in my forcast models.
> EQT and all of our gassers "opened the valves" during Q1 2025 to take advantage of the highest gas prices we've seen in several years. They cannot keep letting wells produce wide open for more than short periods. Of our four "Gassers" in the Sweet 16 (AR, CTRA, EQT and RRC), EQT has the most takeaway capacity.
> Exports of LNG reached 16 Bcf per day last week. That is a new record. New exports records are going be set week after week because the natural gas prices in Asia and Europe are $11.57 and $11.42.
> Demand for gas for power generation will go way up starting in June. < This is why NGas prices rose in Q2 2024 despite gas in storage being WAY ABOVE the 5-year average.

Bottomline: The U.S. natural gas market is much different than the Global Oil Market. The fundamentals for the U.S. natural gas remain very bullish. Now go to the EQT website and study slides 15-20 carefully.

Paradigm Shift: Refilling natural gas storage facilities is part of demand and that demand is going to grow a lot. I cannot stress enough that comparing the amount of gas in storage to the previous 5 years is extremely misleading. Demand for U.S. natural gas is MUCH HIGHER THAN IT WAS 5 YEARS AGO. The natural gas supply lines are getting more important each day as AI Data Centers are built and overall demand for electricity keeps growing.
Bottomline: Refilling storage in not optional. The amount of natural gas in storage at the beginning of each year's winter will keep going higher each year to avoid supply chain problems.
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A new report from the American Gas Association (AGA) has sounded the alarm on the rapidly growing need for expanded natural gas storage capacity across the United States.

The report, titled "Assessing the Value of Natural Gas Storage: A Strategic Asset for Grid Reliability, System Resilience and Operational Flexibility in a Changing Energy Landscape," highlights critical pressures building on the nation's natural gas infrastructure due to an unprecedented surge in energy demand.

According to the AGA, this escalating demand is being fueled by several key factors, including the booming growth of energy-intensive data centers and a significant resurgence in American manufacturing.

The report highlights that the current pace of underground natural gas storage capacity growth, which has slowed to just 0.1% annually, is drastically insufficient to meet these emerging needs.

Karen Harbert, President and CEO of the AGA, emphasized the urgency of the situation. "America’s natural gas system requires expanded storage capacity that is flexible and responsive to help enable our system to reliably meet increasing demand from power generation, data centers and a reshoring of American manufacturing," she stated. "Over the past few years, natural gas production, pipeline capacity and demand have all grown significantly while underground storage capacity has remained largely flat. Despite the proven value of natural gas storage facilities to the energy system, several structural and regulatory challenges continue to limit the system’s overall effectiveness.”

Read more: https://www.msn.com/en-us/money/markets/natural-gas-storage-urgently-needed-to-meet-surging-energy-demand-warns-industry-report/ar-AA1DQlZ2

The Sweet 16 Summary (an Excel workbook) shows the percentage of natural gas and NGLs that each company will be producing in 2025 on a BOE basis on Tabs 2 and 3 of the workbook. This year, you want to own companies that produce a lot of natural gas and NGLs. I update the Sweet 16 Summary each weekend. You also need to know each company's hedging policy.