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Monday 9/13 - "High Natural Gas Prices Today Will Send U.S. Production Soaring Next Year" by Irina Slav

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In case you haven't noticed, on Monday September 13th, Natural Gas prices shot up AGAIN!  Up about 6% depending upon the timestamp.  https://tradingeconomics.com/commodity/natural-gas

High Natural Gas Prices Today Will Send U.S. Production Soaring Next Year

By Irina Slav - Sep 13, 2021, 11:00 AM CDT

https://oilprice.com/Energy/Natural-Gas/High-Natural-Gas-Prices-Today-Will-Send-US-Production-Soaring-Next-Year.html

Natural gas production is set for a significant increase over the next year thanks to the current imbalance between demand and supply, which has pushed prices to record highs, Reuters’ John Kemp reports, citing energy traders.

Meanwhile, however, gas supply for this winter season will be tight, Kemp also said, adding that as a result and in anticipation of next year’s supply recovery, Henry Hub futures had swung into a backwardation, with contracts for delivery in January 2023 round $1.15 per mmBtu lower than contracts for delivery next January. Current Henry Hub prices are around $5 per mmBtu, which is double the price from a year ago, according to the Wall Street Journal.

Natural Gas Prices At Record Highs

The Journal’s Jinjoo Lee noted in a recent report that natural gas could “really use an OPEC-style, coordinated production ramp-up right now.” While U.S. natural gas prices were double those a year ago, the increase in Asia and Europe was even larger, at four times for Asia and five times for Europe, which is already suffering the consequences of gas shortages, with electricity prices spiking, prompting protests in parts of the EU.

It is this tightness of supply that will be one of the biggest motivators for higher U.S. gas production next year, although, per Kemp, the ramp-up in production has already started, with the active rig count topping 100 as of early September and average daily output at 79 billion cu m.

Over the last year, gas producers have boosted production by 1.4 billion cu ft, Canary LLC CEO Dan Eberhart reported for Forbes, and the EIA expects the average daily production for the second half of the year will be 92.9 billion cu ft, up from 91.4 billion cu ft during the first half.

Exports are also set to rise next year, from 14 billion cu ft this year to 19 billion cu ft in 2022, including pipeline and LNG exports.

By Irina Slav for Oilprice.com

Irina Slav

Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.

Latest articles from Irina

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Yup.

Nat gas ain't going away soon.

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Natural Gas Prices Can Still Double From Here

By Alex Kimani - Sep 13, 2021, 4:00 PM CDT

https://oilprice.com/Energy/Natural-Gas/Natural-Gas-Prices-Can-Still-Double-From-Here.html

Natural gas prices have hit their highest levels since 2014, outpacing oil and many other commodities. On Monday, natural gas futures were trading up 2.6% to $5.09 per million British thermal units (BTUs), their highest settlement price since February 2014. Natural gas prices are up 117.6% in the year-to-date, while the biggest nat. gas benchmark, the United States Natural Gas ETF, LP (NYSEARCA:UNG) is up 88.6% over the timeframe. The sticker shock is even greater in other key natural gas markets around the globe, with East Asian benchmark futures and European natural gas spot prices have climbed 4-5 times year-ago levels to $18 per MMBtu.

Yet, some experts are now saying that this rally is far from over.

Stan Brownell, an analyst at Argus Media, and Luke Jackson, an analyst at S&P Global Platts, figure that Henry Hub prices would have to jump to $10 or more to provide an incentive to fulfill domestic natural gas demand. 

That would mean a doubling of natural gas prices from current levels to levels last seen in 2008 when the U.S. produced about 40% less natural gas

Natural Gas (Henry Hub) USD/MMBtu

Natural Gas Prices

Source: Business Insider

International natural gas demand is booming

An unusually cold winter in Europe as well as a global rebound from Covid-19 have triggered strong demand and depleted natural gas inventories. Meanwhile, Hurricane Ida has knocked out a considerable amount of gas production, with 77% of oil and gas production still offline in the Gulf of Mexico. According to U.S. government statistics, natural gas inventories are currently 17% lower compared to a year ago and 7.4% below the five-year average.

Related: Two Ways To Play The 107% Rally In Natural Gas

To catch up to the five-year average storage level by early winter, U.S. natural gas producers need to inject roughly 90.4 billion cubic feet each week from now, about 40% higher than the five-year average weekly buildup clip. The latest data by the Energy Information Administration shows that nat. Gas inventories climbed 52 bcf last week, way below what is required to build enough stockpiles for the winter.

Interestingly, the analysts note that U.S. consumption isn't really the driving force behind the strong price action. Indeed, according to data from the U.S. Energy Information Administration, domestic natural-gas consumption through June was in line with 2020 levels. 

The real culprit here is robust international demand for natural gas as well as a fast-growing U.S. LNG sector.

In the first half of the year, the U.S. exported roughly 10% of its natural gas, or 41% more than a year ago. Normally, excess natural gas produced during the summer would go into underground storage. But that domestic stockpiling has been lower than normal, with producers exporting much of it as LNG.

US Natural Gas Exports

Source: U.S. Energy Information Administration

Asia and Europe still need to stock up more to prepare for the winter, and much of their supplies will have to come from the U.S. because non-U.S. LNG exporters have mostly been down with maintenance-related snags. For instance, Russia, Europe's most important natural-gas provider, has been slowing its deliveries. Natural gas inventories in Europe are currently a whopping 16% below the five-year average and at a record low for September. Meanwhile, continuous unplanned outages at LNG export facilities in several countries, including Australia, Malaysia, Nigeria, Algeria, Norway, and Trinidad and Tobago, have contributed to increased demand for U.S. LNG.

Europe's natural gas spot prices have historically been lower than prices in Asia; however, this year, Europe's natural gas prices are tracking Asia's spot LNG prices more closely to attract flexible LNG supplies from around the world to refill storage inventories.   

A severe winter in the U.S. could lead to domestic markets having to compete with hungry Asian and European buyers, thus driving prices even higher.

The U.S. Henry Hub natural gas benchmark and U.S. LNG spot market prices have been lower than prices for international natural gas and spot LNG this year. This price difference has supported record volumes of U.S. LNG exports. U.S. LNG exports also increased because of new export capacity added in 2020. The final liquefaction units were commissioned at Freeport, Cameron, and Corpus Christi LNG, and the remaining small-scale units were placed in service at Elba Island LNG. The new units increased total U.S. LNG export capacity by a combined 2.7 Bcf/d for a total peak capacity of 10.8 Bcf/d.

Similar to 2020, Asia remains the top destination for U.S. LNG exports, accounting for 46% of the total exports during the first half of the year. Asia was followed by Europe, which had a six-month average share of 37%. Exports to Latin America also increased, particularly to Brazil, which is experiencing its worst drought in more than 90 years. 

A severe winter in the U.S. could easily lead to an even crazier surge in natural gas prices.

By Alex Kimani for Oilprice.com

 

 

 

 

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10 hours ago, Tom Nolan said:

Natural Gas Prices Can Still Double From Here

By Alex Kimani - Sep 13, 2021, 4:00 PM CDT

https://oilprice.com/Energy/Natural-Gas/Natural-Gas-Prices-Can-Still-Double-From-Here.html

Natural gas prices have hit their highest levels since 2014, outpacing oil and many other commodities. On Monday, natural gas futures were trading up 2.6% to $5.09 per million British thermal units (BTUs), their highest settlement price since February 2014. Natural gas prices are up 117.6% in the year-to-date, while the biggest nat. gas benchmark, the United States Natural Gas ETF, LP (NYSEARCA:UNG) is up 88.6% over the timeframe. The sticker shock is even greater in other key natural gas markets around the globe, with East Asian benchmark futures and European natural gas spot prices have climbed 4-5 times year-ago levels to $18 per MMBtu.

Yet, some experts are now saying that this rally is far from over.

Stan Brownell, an analyst at Argus Media, and Luke Jackson, an analyst at S&P Global Platts, figure that Henry Hub prices would have to jump to $10 or more to provide an incentive to fulfill domestic natural gas demand. 

That would mean a doubling of natural gas prices from current levels to levels last seen in 2008 when the U.S. produced about 40% less natural gas

Natural Gas (Henry Hub) USD/MMBtu

Natural Gas Prices

Source: Business Insider

International natural gas demand is booming

An unusually cold winter in Europe as well as a global rebound from Covid-19 have triggered strong demand and depleted natural gas inventories. Meanwhile, Hurricane Ida has knocked out a considerable amount of gas production, with 77% of oil and gas production still offline in the Gulf of Mexico. According to U.S. government statistics, natural gas inventories are currently 17% lower compared to a year ago and 7.4% below the five-year average.

Related: Two Ways To Play The 107% Rally In Natural Gas

To catch up to the five-year average storage level by early winter, U.S. natural gas producers need to inject roughly 90.4 billion cubic feet each week from now, about 40% higher than the five-year average weekly buildup clip. The latest data by the Energy Information Administration shows that nat. Gas inventories climbed 52 bcf last week, way below what is required to build enough stockpiles for the winter.

Interestingly, the analysts note that U.S. consumption isn't really the driving force behind the strong price action. Indeed, according to data from the U.S. Energy Information Administration, domestic natural-gas consumption through June was in line with 2020 levels. 

The real culprit here is robust international demand for natural gas as well as a fast-growing U.S. LNG sector.

In the first half of the year, the U.S. exported roughly 10% of its natural gas, or 41% more than a year ago. Normally, excess natural gas produced during the summer would go into underground storage. But that domestic stockpiling has been lower than normal, with producers exporting much of it as LNG.

US Natural Gas Exports

Source: U.S. Energy Information Administration

Asia and Europe still need to stock up more to prepare for the winter, and much of their supplies will have to come from the U.S. because non-U.S. LNG exporters have mostly been down with maintenance-related snags. For instance, Russia, Europe's most important natural-gas provider, has been slowing its deliveries. Natural gas inventories in Europe are currently a whopping 16% below the five-year average and at a record low for September. Meanwhile, continuous unplanned outages at LNG export facilities in several countries, including Australia, Malaysia, Nigeria, Algeria, Norway, and Trinidad and Tobago, have contributed to increased demand for U.S. LNG.

Europe's natural gas spot prices have historically been lower than prices in Asia; however, this year, Europe's natural gas prices are tracking Asia's spot LNG prices more closely to attract flexible LNG supplies from around the world to refill storage inventories.   

A severe winter in the U.S. could lead to domestic markets having to compete with hungry Asian and European buyers, thus driving prices even higher.

The U.S. Henry Hub natural gas benchmark and U.S. LNG spot market prices have been lower than prices for international natural gas and spot LNG this year. This price difference has supported record volumes of U.S. LNG exports. U.S. LNG exports also increased because of new export capacity added in 2020. The final liquefaction units were commissioned at Freeport, Cameron, and Corpus Christi LNG, and the remaining small-scale units were placed in service at Elba Island LNG. The new units increased total U.S. LNG export capacity by a combined 2.7 Bcf/d for a total peak capacity of 10.8 Bcf/d.

Similar to 2020, Asia remains the top destination for U.S. LNG exports, accounting for 46% of the total exports during the first half of the year. Asia was followed by Europe, which had a six-month average share of 37%. Exports to Latin America also increased, particularly to Brazil, which is experiencing its worst drought in more than 90 years. 

A severe winter in the U.S. could easily lead to an even crazier surge in natural gas prices.

By Alex Kimani for Oilprice.com

took gs

 

"

 

Lest you forget, as long as you have speculators in the market ,  it can go down as fast as it goes up. The guys with propellers on their beanies  took gas prices from $2.07 to -$4.78 at Waha in 24 hours https://www.ft.com/content/a5292644-958d-4065-92e8-ace55d766654 in April 2020.

As George Mitchel said there is no cure for high NG prices as efficient as high prices,"   Pipeline capacity constraints, weather(Lower temps took off more thermal load in Texas plus LNG terminals for 3 weeks fro Freeport to Lake Charles),  Tennessee reversed flow on line 200  to North to South and shut in receipts from the Trans Texas parallel 36" line from Waha to Carthage."Currently, 44% of U.S. Gulf crude production is offline, while 52% of the region's gas output is down. This has put a bid under natgas and crude prices. "

They forget that the cloud cover has cut average daily temps by 8-12 degrees cutting 15,000 mw of NG fired generation and higher than normal wind speeds across the wind belt (high pressure brings up wind power as it flows from high pressure to low pressure)  cuts an additional +/- 3,000 mw.  That leaves AC loads 18,000 mw short normal(20 BCF and that doesn't count markets out side Texas).  Add about 3000 extra mw for wind  and ERCOT is 30% below normal powerplant usage.  PURPA says you have to turn off gas, oil and coal plants before curtailing wind and solar. My thermostat shows no AC use since 9:45 pm yesterday. Bad news for electric.  Pipelines can only handle so much increase in line pack.

Once Nicholas is gone it will take about 20 days to restart the LNG trains for exports.  The down swing on the pendulum will be a lot tougher than the up tick we see today,

 

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1 hour ago, nsdp said:

Once Nicholas is gone it will take about 20 days to restart the LNG trains for exports.  The down swing on the pendulum will be a lot tougher than the up tick we see today,

I agree.  I am now short NatGas.

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Natural Gas Price Fundamental Daily Forecast – Supported by Specs Betting on Less Adquate Storage Levels

Bespoke is pointing out strong gains in Henry Hub futures which coincide with rallying prices overseas and storage adequacy concerns.

James Hyerczyk

https://www.fxempire.com/forecasts/article/natural-gas-price-fundamental-daily-forecast-supported-by-specs-betting-on-less-adquate-storage-levels-776891

Natural gas futures are trading sharply higher for a third straight session this week as supply worries continue to drive strong demand in anticipation of inadequate inventory levels as we get closer to the start of the winter heating season.

At 13:46 GMT, December natural gas futures are trading $5.620, up $0.222 or +4.11%.

Bespoke Weather Sees Significant Running Room for Liquefied Natural Gas

Bespoke Weather Services is pointing out strong gains in Henry Hub futures which coincide with rallying prices overseas and storage adequacy concerns both at home and abroad, Natural Gas Intelligence reported.

“Natural gas prices are (surprise, surprise) up sharply this morning seemingly piggybacking off European prices, which have been up more than 10% so far today,” Bespoke told clients in a note early Wednesday. “…It is all fear in the market, owning to storage levels that are viewed as less than sufficient in the event of a cold winter, not just here in the U.S., but even more so over in Europe.

“It makes it very difficult to say when this rally could end, or how high we can go, as we have tons more upside potential if the market begins to worry more about the possibility of having to price out LNG this winter.”

Wood Mackenzie Sees Some Tropical Storm Nicholas Impact on LNG Export Operations

Natural Gas Intelligence reported that according to Wood Mackenzie, Tropical Storm Nicholas appears to have had at least some impact on LNG export operations. On Tuesday, the firm notified clients when it observed evidence that all three trains at the Freeport LNG facility had turned off.

“Power outages are the most likely culprit,” Wood Mackenzie analyst Kara Ozgen said, noting that the local power outage rate near the Freeport terminal “reached 75% yesterday morning. Also supporting this idea was Centerpoint Energy’s outage map, which showed that there were power outages in the same area where Freeport LNG is situated.”

Short-Term Outlook

Thursday’s Energy Information Administration (EIA) weekly storage report “will begin the string of more robust shoulder season injections,” Energy Aspects said in a note to clients. However, this is not likely to stop the rally because speculators are focused on an even longer-term picture that carries into at least the start of the winter heating system.

Ahead of the EIA report, Energy Aspects are estimating a 74 Bcf build for the week-ended September 10.

For a look at all of today’s economic events, check out our economic calendar.
~~~~~~~~~~~~~~~

Early Look at This Week’s US Energy Information Administration Weekly Storage Report

Total stocks now stand at 2.923 trillion cubic feet (TCF), down 592 Bcf from a year ago and 235 Bcf below the five-year average, the government said.

For the EIA’s next print, scheduled for release Thursday, analysts are looking for a larger build. NGI estimated a 72 Bcf increase for the week ended September 10. Bespoke preliminarily estimated an injection of 79 Bcf.

The five-year average for this time of year is an increase of 79 Bcf, and for the comparable week a year earlier, EIA reported a build of 86 Bcf.

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September 14th

Natural Gas Price Forecast – Natural Gas Markets Continue Parabolic Run

The natural gas markets have rallied again during the trading session on Tuesday as we continue the overall parabolic run.

Christopher Lewis

https://www.fxempire.com/forecasts/article/natural-gas-price-forecast-natural-gas-markets-continue-parabolic-run-776434

Natural gas markets have rallied again during the trading session on Tuesday as we continue this massive parabolic run. That being said, it is difficult to chase a train like this, because quite frankly this has been over the top. Now that we are well above the $5.25 level, where we go next as far as the upside is concerned it is more or less a gas, with $5.50 being the most likely of candidates.

That being said, we have gone so parabolic that sooner or later we are going to get a nasty selloff that could be very dangerous for your account. Unless you are already long at this point, it is going to be difficult to get involved. If you are already long of this market, then you have to look at the area just below the $5.00 level as potential massive support. If we were to break down below the $4.85 level, then I think we probably have something more nefarious at hand. Nonetheless, buying on the dips is about the only thing you can do if you want to be involved. I certainly would not be a seller of this market, because we continue to see one reason after another for the market to go higher.

The most recent reason for natural gas prices going higher has been the tropical storm in the Gulf of Mexico which could shut down refining capacity temporarily in a market that is already struggling for some type of normalcy. The market will continue to see a lot of bullish pressure in the short term, but when this ends, it could be rather negative. At this point though, we are showing no signs of that.

VIDEO - One minute - Graph Technicals

https://youtu.be/6gXbPqzp6pU

<iframe width="560" height="315" src="https://www.youtube.com/embed/6gXbPqzp6pU" title="YouTube video player" frameborder="0" allow="accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture" allowfullscreen></iframe>

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Shorting time. I don't usually mess with futures but I can't imagine NatGas climbing higher than $7.00.

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(edited)

Wood Mackenzie Sees Some Tropical Storm Nicholas Impact on LNG Export Operations

Natural Gas Intelligence reported that according to Wood Mackenzie, Tropical Storm Nicholas appears to have had at least some impact on LNG export operations. On Tuesday, the firm notified clients when it observed evidence that all three trains at the Freeport LNG facility had turned off.

“Power outages are the most likely culprit,” Wood Mackenzie analyst Kara Ozgen said, noting that the local power outage rate near the Freeport terminal “reached 75% yesterday morning. Also supporting this idea was Centerpoint Energy’s outage map, which showed that there were power outages in the same area where Freeport LNG is situated.” f

 

This is an excellent example of how many commentators are not qualified to talk about what they discuss,   INFORMATION ON TRANSMISSION LINES HAS BEEN REMOVED FROM PUBLIC ACCESS SINCE 1/2010.   Information on line is only available through OATI for general public use https://www.nerc.oati.com/NERC/sys-login.wml  Kara Ozgen can see DISTRIBUTION line outages only through Centerpoint. She is not listed as an authorized OATI user so she cannot see what is happening on the transmission grid; she has no access to realtime power flows at the Freeport .LNG substation.   One transmission 345kv line(A line) from STNP to Oyster Creek is out.  But all three other lines: STNP Oyster Creek B-line and both A and B lines from Manvel to Oyster Creek are operational. The only 138 Kv line out is one side of the 138 kv feeders to Danbury  and the motorized switch is open so Danbury has single line feed from Alvin. That leaves 6 138 kv lines to feed OysterCreek, Dow, Badische, Freeport LNG and Seaway Pipeline and the distribution substations for Clute, Freeport, Jones Creek, Lake Jackson and TNP at Angleton and  Brazoria.

Edited by nsdp
forgot one substation.
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How Long Can U.S. Shale Producers Resist The Oil Price Rally?

By Irina Slav - Sep 15, 2021, 7:00 PM CDT

https://oilprice.com/Energy/Oil-Prices/How-Long-Can-US-Shale-Producers-Resist-The-Oil-Price-Rally.html

It would have been unthinkable a few months ago: ramping up production was the last thing U.S. shale drillers would do amid a hesitant price recovery and heavy uncertainty around demand recovery. In these few months, however, a lot has changed. Now, U.S. shale drillers may be ready to get back to drilling. The current situation in U.S. oil is one that shale companies must have dreamed about during the worst of the crisis. Inventories are down considerably, thanks to recovering demand. But they are also down due to the recent shut-ins of offshore production thanks to Hurricane Ida.

On top of that, the shale industry's own inventory of drilled but uncompleted wells (DUCs) is also down considerably, Reuters has reported, citing analysts and industry insiders.

This means that soon, we could see a more sizeable increase in the U.S. rig count as shale producers seek to avert a decline in production. It also means that shale companies might see some renewed investor criticism because drilling more would require higher spending, and investors have been extra-sensitive towards spending recently.

They could hardly be blamed for this sensitivity. Investors in the shale oil industry have endured years of low returns while the companies they invested in poured everything into pumping as much oil as they possibly could. This all came to an end not once but twice, the second time in a more painful way as the pandemic turned what would have otherwise been a regular oversupply crisis into the mother of all oversupply crises, plunging the U.S. oil benchmark below zero for the first time ever.

After the worst was over, oil companies began redirecting what cash they had towards dividends to keep investors happy. They also became a lot more disciplined with their money in the face of an uncertain future. However, shale oil production is an intensive process: wells are quick to start producing but also quick to deplete, which means drilling is more frequent than it is in conventional oil production, hence the new development.

For months, shale oil companies drew on their DUC inventory, which was high enough to keep spending within strict limits, Reuters notes in its report. But now, this inventory is down to below 6,000 as of July, from some 8,900 in 2019, and drilling needs to start again. Putting DUCs into operation costs about 60 percent of what it costs to drill a whole new well. Fortunately, oil is trading high enough to soften the blow to investors who are likely to be suspicious about any news regarding higher spending.

Another thing that could soften this potential blow is the fact that U.S. shale drillers are actually generating quite a lot of cash, according to industry veteran David Messler. In a recent article for Oilprice, Messler wrote that many shale companies are enjoying cash generation that significantly exceeds their dividend needs. This would put these companies in a comfortable position concerning the need for a production boost. As long as new well drilling does not require taking money away from investors, everyone should be happy.

There have been more efficiency gains, too, and this is another plus for shale companies looking to both ramp up production and keep their investors satisfied. As Argus reported at the end of August, citing the CFO of Diamondback Energy, some shale companies now need fewer rigs and smaller crews to drill the same number of wells. The report also cited gains in well productivity, citing EIA data that showed new well production exceeded the rate of depletion in legacy wells.

Related: Exxon Makes 20th Significant Crude Discovery Off Guyana

U.S. crude oil production over the past four weeks has averaged a little over 11 million bpd, according to the latest weekly petroleum report of the Energy Information Administration. This compares with 10.3 million bpd a year ago. Output is growing and, according to the International Energy Agency, is set for stronger growth next year, too, with U.S. shale accounting for some 60 percent of total non-OPEC production growth next year.

Now, this could have an undesirable—for the industry—impact on prices and likely will. According to the Oxford Institute for Energy Studies, "As we enter 2022, the US shale response becomes a major source of uncertainty amid an uneven recovery across shale plays and players alike. As in previous cycles, US shale will remain a key factor shaping market outcomes."

On the other hand, U.S. shale has proved it can be flexible, and in case of further resurgences of the coronavirus or other demand-hurting events, it could respond pretty quickly. Shale companies also appear to be quite comfortable with the current price levels, and with investors still sensitive, they are unlikely to jeopardize their new cash-generating abilities by boosting production excessively. It seems the times of pumping as much as possible because you can could be over for good.

By Irina Slav for Oilprice.com

 

 

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As much as I'd like to see NG at some higher, stable price, no one in the industry predicted anything much over $3-3.5 until 2023 and that's more likely the realized price for most of the gas anyways.   This spike is a confluence of factors:

Ida shutting production temporarily
Gasprom reducing output in anticipation of Nordstream 2 coming online to ensure it opens without further fuss
Continuing strong US demand from traditional sources of demand like industrial and switching and places like CA that are only building NG capacity.

And new demand coming on line like LNG, picking up the rest of the slack.

In theory this should also provide upward pressure on coal and oil as it becomes more economical vs gas.

I don't really buy the shale discipline argument--they are pumping tons of gas, depletion is not as big an issue as its being made out to be--we are at peak supply and there is plenty more where that came from, just not @ $3.   I think the main reason they arent pumping all out is political and sentimental--they have finally realized their behavior is provoking KSA into irrational behavior and need to signal that they have "discipline".

So I'm on the fence about selling the COG rally and missing the merger dividend, will probably do in my non-tax accounts.  COG is case in point because they are continuing to ramp up production in the face of generally low prices.    Right now, they dont have any excess revenues to pay out anyway, and their merger is unpopular, which is why it went below $15.    KMI has performed miserably on the basis of its very poor revenue outlook vis contract rolloff so its not participating in this either.    That just highlights that any given gas company isn't going to be the short term beneficiary of this, and won't perform well if prices renormalize.


All of these factors have to combine to spike prices.    I'm also pretty sure this winter we are going to have further debacles in various midwestern state markets where prices skyrocket briefly but that is more about the retail price and short term availability of gas, not the wholesale price and the beneficiaries are the utilities, not the streamers or producers.    That may indeed conspire to spike prices again in Nov-Jan, but once spring comes, what's the catalyst?

There is plenty of gas, so once the Russians get their point across, and cool autumn comes and the windows open up, unfortunately I see gas back at $3.50, Oil $60.      Any random event could cause it to spike--but with both oil and gas there is simply so much available supply and more on the table that until all the factors combine together (russian power plays plus high consumption and demand PLUS LNG exports en mass) its not going to stay high.   And those factors are predicted to be present in 2030, not 2022.

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Europe’s Energy Crisis Is Driving Up Natural Gas Prices Worldwide

By Tsvetana Paraskova - Sep 16, 2021, 7:00 PM CDT

Natural gas prices all over the world are surging amid a perfect storm of tight regional gas markets and soaring power prices in Europe. The natural gas rally isn’t over yet—and it has further room to hit fresh record highs, especially if the coming winter turns out to be colder than typical in the northern hemisphere. The natural gas crunch and the sky-is-the-limit rally in electricity prices are most evident in Europe. But the increased interdependence among regional gas markets in the U.S., Asia, and Europe in recent years now means that natural gas price spikes in one region cannot be ignored by the markets in the other regions.  

As the northern hemisphere prepares for the coming winter, analysts say that weather will be the most important factor for natural gas prices and markets in the next few months. And if it’s colder than usual, Europe will not be the only one to feel a hot rally in energy prices.

The gas supply crunch in Europe is “going to put the focus on this commodity that’s been overlooked for the last several years,” John Kilduff, partner with Again Capital, told CNBC this week.

A Perfect Storm In Europe Even Before Winter

Europe’s tight gas market, low wind speeds, abnormally low gas inventories, and record carbon prices have combined in recent weeks to send benchmark gas prices on the continent and power prices in the largest economies to record highs.

Almost daily, gas and power prices in Europe surge to fresh records, putting pressure on governments as consumers protest against soaring power bills ahead of the winter heating season.

With just two weeks to go until the end of the injection season, natural gas inventories in Europe are at their lowest level for September in recent memory. This makes the market anxious about a dramatic supply crunch if this winter is anything like last winter, when temperatures were below norms for extended periods of time and a cold snap in the spring depleted stockpiles. Those inventories couldn’t be adequately replenished as demand in Asia has also been strong, while supply in Europe has dropped due to lower deliveries from Russia.  

During the summer, even with the strong rebound in European natural gas demand and surging prices, Russian giant Gazprom did not book additional entry capacity to Europe via Ukraine.

Analysts say that this could have been an opportunistic move from the Russian giant to drive up Europe’s gas prices further and take advantage of the high prices. Other analysts think that Gazprom’s effective reduction in supplies would force Europe to recognize that gas customers on the continent need the controversial Nord Stream 2 pipeline to Germany, which bypasses Ukraine.  

Kremlin Says Nord Stream 2 Could Come To The Rescue

Now that Russia has completed the construction of Nord Stream 2 and awaits a German regulatory nod to start gas flows, the Kremlin says that a quick approval and launch of the pipeline would help tame Europe’s soaring prices.

“Obviously, the commissioning of Nord Stream 2 as soon as possible will substantially balance natural gas price parameters in Europe, including on the spot market,” Kremlin spokesman Dmitry Peskov said on Wednesday.

Regardless of whether Gazprom’s lower summer gas deliveries were a power play or the result of unexpected outages, the fact is that they contributed to the current gas shortage in Europe.

Europe’s Gas Crunch Drives Up U.S. Prices and LNG Exports

In today’s interconnected regional gas markets, record-high prices in Europe drive U.S. benchmark prices up, too.

“The U.S. is supposed to be an island, but in the last three or four years, there’s an increasing link between the U.S. and global market,” Francisco Blanch, head of commodities and derivatives strategy at Bank of America, told CNBC.

“We’ve gone from 50% correlation to 95% correlation. The U.S. market is being dragged around by this,” said Blanch.

In the United States, the Henry Hub price hit on Wednesday its highest in seven and a half years, “seemingly piggybacking off European prices,” Bespoke Weather Services said in a note carried by Natural Gas Intelligence.

Related: Chevron CEO: Shareholder Returns Are More Important Than Solar, Wind Investment

High demand for gas in Europe and Asia and the high Asian spot LNG prices even in the off-peak season are driving record exports of American LNG. High LNG exports, in turn, tighten domestic U.S. gas supply amid relatively flattish production in recent months and the still shut-in 39 percent of the U.S. Gulf of Mexico gas production as of September 15, more than two weeks after Hurricane Ida forced platform evacuations in the area.

U.S. natural gas prices may cool with pleasantly warm early fall weather, analysts say.

Yet, the natural gas/LNG supply squeeze globally is setting the stage for record winter prices, Lindsay Schneider at RBN Energy wrote last week.

“The incredible bull run for global gas prices has been underpinned by high demand for LNG and the cascading effect of a supply squeeze in Europe, brought on by the triple threat of low domestic production, decreased imports from Russia, and a scarcity of incremental LNG cargoes,” Schneider says.

“Not only is this driving record-high gas prices and increased volatility now, but the low inventory means sustained high prices for the heating season ahead,” the energy analyst noted.  

By Tsvetana Paraskova for Oilprice.com

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(edited)

Natural gas prices arent high is just that the US currency lost 15% of its value in a year, historically gas is bit under  4U$D/Mbtu in 2010 USD which is around 5U$D today.

Edited by Sebastian Meana

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Gazprom: Russia Has Gas Reserves For More Than A Century

By Tsvetana Paraskova - Sep 17, 2021, 1:00 PM CDT

https://oilprice.com/Energy/Natural-Gas/Gazprom-Russia-Has-Gas-Reserves-For-More-Than-A-Century.html

Russia's natural gas reserves will last for more than a century, Alexey Miller, chairman of the board of gas giant Gazprom, said on Friday.

"Gas reserves in Russia, Gazprom's gas reserves are the largest in the world. And we won't have any problems with our reserves for the next 100 years," Miller said at a business conference in Moscow, as carried by Russian news agency TASS.

Some of the gas fields that Gazprom is developing in the Yamal region have the potential to produce gas until 2132, Miller noted.

"The prospects for pipeline gas supplies are quite great," Gazprom's head said.  

Last week, Gazprom completed the construction of the Nord Stream 2 pipeline, although gas flows on the controversial Russia-led pipeline cannot begin until Germany grants an operating license to the project.

Earlier this month, Russian Deputy Prime Minister Alexander Novak said that Russia's offshore Arctic resources alone could last for decades and even centuries. 

"The potential of the Arctic zone is huge. Speaking about offshore resources only, those are 15 bln tonnes of oil and around 100 trillion cubic meters of gas. That will suffice for decades, hundreds of years if they are required and it is economically reasonable," Novak said on Thursday, as carried by Russian news agency TASS.

These resources, however, are very expensive to develop right now, the Russian official said, but noted that the government plans to encourage offshore Arctic development regardless.

Massive offshore Arctic development would take place only if needed and only if other regions in Russia run out of resources, Novak added.

Arctic offshore project developments in Russia are under U.S. sanctions which ban the provision of services or technology in support of exploration or production for deepwater, Arctic offshore, or shale projects.

Earlier this year, Russian Natural Resources Minister Alexander Kozlov said that Russia's oil reserves would last until 2080 at the current pace of annual production.

Russia also has natural gas reserves for another 103 years of annual production at current output levels, the minister said.

By Tsvetana Paraskova for Oilprice.com

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8 hours ago, Sebastian Meana said:

Natural gas prices arent high is just that the US currency lost 15% of its value in a year, historically gas is bit under  4U$D/Mbtu in 2010 USD which is around 5U$D today.

There I were, sleeping, thinking that there was a supply crunch. Behold inflation... Perhaps a short position isn't wise. 

  • Upvote 1

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(edited)

22 hours ago, KeyboardWarrior said:

There I were, sleeping, thinking that there was a supply crunch. Behold inflation... Perhaps a short position isn't wise. 

I mean, if you listen what the FEDs say, and discount the fact that fuel, minerals, groceries, electricity, water, natural gas, is more expensive or that the stock market is going higher and higher, that the Dollar lost 10% its value against the Swiss Franc, or that real estate is becoming more unaforrdable everyday, if you remove all those factors, then inflation isnt that high

One could start shorting the dollar, isnt the safest bet for sure, but nowadays isnt completely unthinkable

Edited by Sebastian Meana

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10 hours ago, Sebastian Meana said:

I mean, if you listen what the FEDs say, and discount the fact that fuel, minerals, groceries, electricity, water, natural gas, is more expensive or that the stock market is going higher and higher, that the Dollar lost 10% its value against the Swiss Franc, or that real estate is becoming more unaforrdable everyday, if you remove all those factors, then inflation isnt that high

One could start shorting the dollar, isnt the safest bet for sure, but nowadays isnt completely unthinkable

Could be - could be.  The US government is definitely doing everything in its power to devalue its currency.  The question from an investment perspective is that they may still fail to fall faster than their competitors.  It’s like a race to see who can cripple themselves first. 

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Now is definitely not the time for long positions. That's for AFTER the crash; and I'm confident that a crash is coming. 

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