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

[Tom Nolan + 2,441]

https://www.zerohedge.com/commodities/eu-gas-prices-soar-ns2-delays-sudden-belarus-pipeline-closure

EU Gas Prices Soar On NS2 Delays, Sudden Belarus Pipeline Closure

by Tyler Durden

Wednesday, Nov 17, 2021 - 10:20 AM

European natural gas prices continue to soar after Nord Stream 2 pipeline delays were seen earlier this week, and now a major crude pipeline from Russia into Europe has temporarily halted flows due to "unscheduled repairs." 

The newest market generated information pushing up European natgas prices to the highest levels in a month is due to a Belarus portion of the Druzhba oil pipeline system carrying Urals crude from Russia to Europe has temporarily halted flows to address "unscheduled repairs," the Russian energy export giant Transneft wrote in a statement. 

"Unscheduled repairs were started on one of the branches of the Druzhba oil pipeline, limiting the flow in the direction of Poland for approximately three days, while the planned target for the month is not being revised," Transneft spokesman Igor Demin said.

 

Gomeltransneft, the operator of the Belarusian section, said maintenance began on Nov. 16. "Starting from yesterday, Gomeltransneft has started an unplanned maintenance at one of the lines of the Druzhba pipeline, having restricted [crude] pumping towards Adamowa Zastawa [in Poland] tentatively for three days, but the plan for the month is not revised," a Transneft spokesman said. 

Druzhba is one of the largest pipeline networks in the world that carries a mix of heavy sour oil of Urals and light oil of Western Siberia, where its network splits in two and pumps the crude into a northern section, Poland and Germany, and a southern area, Ukraine to Slovakia, the Czech Republic, and Hungary.

The unscheduled repairs, restricting flows, come days after Belarusian leader Alexander Lukashenko threatened to cut the transit gas supply from Russia to Europe over a migrant crisis at the Belarus-Poland border.

Compound that with the approval process for the Nord Stream 2 pipeline now delayed...

As Katabella Roberts writes at The Epoch Times, Germany’s energy regulator the Bundesnetzagentur announced on Tuesday that it has suspended the certification process for a major new pipeline connecting the country and Russia, after ruling that its operator within Germany does not comply with conditions set by German law.

The watchdog said on Tuesday it had temporarily halted the certification process because the Swiss company behind Nord Stream 2 had decided not to turn itself into a German company but had instead set up a subsidiary under German law to deal with the section of the pipeline on German territory.

The Swiss-based consortium first needs to form a German subsidiary company under German law to secure an operating licence, the regulator said.

“Nord Stream 2 AG, which is based in Zug (Switzerland), has decided not to transform its existing legal form but instead to found a subsidiary under German law solely to govern the German part of the pipeline. This subsidiary is to become the owner and operator of the German part of the pipeline. The subsidiary must then fulfil the requirements of an independent transmission operator as set out in the German Energy Industry Act,” the Bundesnetzagentur said in a statement.

“Following a thorough examination of the documentation, the Bundesnetzagentur concluded that it would only be possible to certify an operator of the Nord Stream 2 pipeline if that operator was organised in a legal form under German law,” the German regulator said.

...and the Dutch month-ahead gas, the European benchmark, is up at least 33% this week. 

For a sense of the scale of Europe's gas price crisis, the following chart puts UK, US, and EU NatGas on par with WTI Crude (per barrel of oil equivalent BTUs), As is clear, there is a huge energy disparity between gas in Europe, providing more incentives for switching again (but not helped by Belarus now shutting its oil pipeline).  

The timing of the Druzhba maintenance and delay of the Nord Stream 2 certification process comes at the worst possible moment. Europe faces a massive energy crunch as natgas stockpiles are the lowest in a decade, just as Europe faces its first cold winter blast. Widespread below-average temperatures continue to plague parts of the continent, as the following chart of NW Europe Heating Degree Days shows.

Meanwhile, Europe's natgas storage levels are the lowest since 2013.

These unexpected delays or hiccups to crude and natgas flows from Russia to Europe are ahead of the first cold blast of the season, as energy inflation and supply chain disruptions due to the energy crisis and pandemic could metastasize into a "winter of discontent," fueling socio-economic instabilities across Europe.

[Tom Nolan + 2,441]

https://www.zerohedge.com/political/build-back-better-methane-fee-means-higher-costs-heating-oil-natural-gas

https://insidesources.com/build-back-better-methane-fee-means-higher-costs-for-heating-oil-natural-gas/

'Build Back Better' Methane Fee Means Higher Costs For Heating Oil, Natural Gas

by Tyler Durden

Wednesday, Nov 17, 2021 - 01:30 PM

Authored by Chris Woodward via InsideSources.com,

Environmental activists call it a “methane fee.” The energy industry calls it a “natural gas tax.” Either way, energy consumers are likely to feel the effects in their pocketbooks.

The U.S. House of Representatives is expected to vote this week on its version of the budget reconciliation bill — also known as the “Build Back Better” bill — which includes increased fees on methane emissions. Methane is a byproduct of oil and natural gas production, and as a result, the fee would be an increase in the cost of production.

Environmentalists say reducing methane is essential to the fight against climate change. At the COP26 meeting in Scotland last week, the United States announced it will participate in the Global Methane Pledge to cut methane emissions 30 percent by 2030.

“Methane has more than 80 times the warming power of carbon dioxide over the first 20 years after it reaches the atmosphere,” says Environmental Defense Fund (EDF) on its website.

“Even though CO2 has a longer-lasting effect, methane sets the pace for warming in the near term.”

As National Geographic reports, “Whereas carbon dioxide persists for centuries, most methane converts to carbon dioxide or gets cycled out of the atmosphere within about a decade.”

Meanwhile, two of the world’s biggest methane emitters — China nor Russia — refused to sign the Global Methane Pledge.

And energy producers point to America’s surging costs to heat their homes this winter and the wider inflation problem as evidence that this is the wrong time to add costs to consumers’ utility bills.

“This is nothing more than a tax on natural gas at a time when policymakers should be focused on solutions that support affordable, reliable energy while reducing emissions,” says API Senior Vice President of Policy, Economics and Regulatory Affairs Frank Macchiarola.

“We must continue to drive down methane emissions without adding new burdens on American families and businesses,” added Karen Harbert, President and CEO of the American Gas Association.

“Our analysis indicates that the proposed tax could increase natural gas bills from 12 percent to 34 percent, depending on the variation of the proposal assessed.”

Sen. Joe Manchin, a Democrat representing natural-gas producing West Virginia, has been reluctant to support legislation with a tax or fee on methane. As a result, House Democrats have been trying to find ways to change the terminology and get Manchin’s blessing once the bill is approved in the House and sent to the Senate. Democrats’ have a razor-thin majority in both chambers and need the support of every Democrat in the Senate.

Winning over Manchin has not been, and will not be, easy.

“Major oil and gas companies are actively investing in, developing, and using new technologies to detect and repair leaks, which are known to be a public health risk and contribute to climate change,” Manchin said in August 2020.

Meanwhile, API’s Macchiarola says methane is already being regulated.

“The direct regulation of methane by the EPA is the most impactful way to build on the downward trend of methane emission rates in key producing regions rather than a duplicative and punitive natural gas tax that would only hurt American consumers and undermine the economic recovery,” says Macchiarola.

Gordon Tomb, senior adviser to the CO2 Coalition, does not see a need for the regulations.

“Methane makes up a minuscule portion of the atmosphere — less than two parts per million — and together with carbon dioxide contributes an estimated 0.012 degrees C a year — an amount too small to even measure,” says Tomb.

“Regulating emissions of either gas has no basis in science and imposes an unnecessary burden on businesses and the people who buy their products.”

And, Tomb added, “When politicians are talking about regulating methane, they are usually talking about taxing methane that gets leaked to the environment during production operations, treating that methane as a pollutant,” says Tomb. “Of course, methane is put into the atmosphere from all kinds of sources, and in the scheme of things the amount in the atmosphere is quite small irrespective of where it is coming from.”

The Marcellus Shale Coalition has also warned that taxes or fees would be bad for everyone.

“Layering more taxes on strongly regulated domestic energy production increases costs for those who produce and rely on these essential resources, with low-and fixed-income families shouldering the disproportionate share of the tax hike,” the group wrote in a September letter that included the Gas & Oil Association of West Virginia and the Ohio Oil & Gas Association.

And while organizations including the Sierra Club say fossil fuel organizations do not care about the environment, Marcellus Shale Coalition begs to differ.

“Our members are fully committed to improving air quality and further reducing all emission sources, particularly methane since it is the very product we sell, through leveraging best available technologies and practices.”

 

[Tom Nolan + 2,441]

https://finance.yahoo.com/news/rolling-blackouts-threaten-europe-winter-132245487.html

Rolling blackouts threaten Europe this winter

Shortages of natural gas could cause rolling blackouts in Europe this winter, one of the world’s largest commodity traders has warned, as gas prices surged after Germany suspended certification of a key new pipeline from Russia.

Jeremy Weir, chief executive of Trafigura, said a prolonged cold snap could cause major problems in comments likely to spark alarm in Britain following months of soaring energy prices.

“We haven’t got enough gas at the moment quite frankly. We’re not storing for the winter period, so hence there is a real concern that ... if we have a cold winter that we could have rolling blackouts in Europe,” he told the Financial Times Commodities Asia summit.

A global gas supply crunch has triggered a sustained gas price rally, forcing manufacturers to curb output and pushing 21 UK energy suppliers out of business since the start of September.

Gas plays a major role in electricity generation, meaning shortages have also pushed up power prices and risked causing blackouts, particularly when combined with low wind speeds denting output from wind turbines.

Russia has been accused of adding to the pressure by withholding extra supply to Europe to pressure Germany into giving the final approval for the Nord Stream 2 pipeline.

On Tuesday prices in Europe and Britain climbed 23pc to 238.9p per therm after Berlin suspended certification for the pipeline from Russia to Germany via the Baltic Sea.

German regulators took the decision after Nord Stream 2 set up a subsidiary to run the German section of the pipeline.

“The Bundesnetzagentur [regulator] concluded that it would only be possible to certify an operator of the Nord Stream 2 pipeline if that operator was organised in a legal form under German law,” they said.

“The subsidiary must then fulfil the requirements of an independent transmission operator as set out in the German Energy Industry Act.”

Nord Stream 2 told Bloomberg it was creating the subsidiary to “ensure compliance with applicable rules and regulations”, adding: “We are not in the position to comment on details of the procedure, its possible duration and impacts on the timing of the start of the pipeline operations.”

Owned by Russian state gas company Gazprom, Nord Stream 2 has been controversial as it allows Moscow to bypass Ukraine when sending gas to European markets and risks increasing Europe’s reliance on Russian supplies.

The US had opposed the project but in July struck a deal with Germany allowing the pipeline to go ahead, with Berlin pledging to respond to any attempt by Russia to use energy as a weapon against eastern European countries.

Europe gets about 40pc of its gas from Russia. Britain does not import much gas directly from Russia, but it does take some from Europe via pipelines, and prices in both markets track each other.

The controversial Nord Stream 2 pipeline risks increasing Europe's reliance on Russian gas - Maxim Shemetov/REUTERS

Two more UK electricity suppliers collapsed on Tuesday, with several more thought to be at risk. Neon Reef and Social Energy Supply have about 30,000 and 5,500 customers respectively. Under the industry safety net, the regulator Ofgem will send each company's customers to a surviving supplier.

The price cap on energy bills prevents household suppliers from passing the costs onto customers immediately, but bills are predicted to rise by as much as £400 when the cap is next reset in April.

The cap does not apply to business customers, however. In September the Government was forced to step in with financial support for fertiliser plants in Cheshire and Teesside, after owner CF Industries closed the plants due to the high gas prices.

Trafigura’s Nyrstar zinc business in September cut production during peak times at its zinc smelter in the Netherlands due to soaring power prices caused by the high gas prices.

Mr Weir said the market had also been “challenging” for commodity traders but that the privately owned company was set for a “strong year”.

[Tom Nolan + 2,441]

https://tradingeconomics.com/commodity/eu-natural-gas

EU Natural Gas

European gas prices rallied more than 35% in the past sessions to €95 per megawatt-hour, a level not seen since October 14th and close to a record €116.2 per megawatt-hour hit on October 5th. Prices soared following news that the German regulator has suspended the certification of the Nord 2 Stream pipeline, coupled with forecasts of colder weather. The permitting process will be on hold until the operator of the pipeline completes the setting up of its German subsidiary, which will control the section of the pipeline within the country’s limits. Traders are expecting Russia to increase supplies to Europe only when the project receives its final approval. Earlier, Gazprom had booked zero extra gas flows to Europe via Ukraine for December, an auction result showed.

[Tom Nolan + 2,441]

https://finance.yahoo.com/news/global-lng-prices-rise-robust-142510423.html

GLOBAL LNG-Prices rise on robust demand ahead of peak winter months

LONDON, Nov 19 (Reuters) - Asian liquefied natural gas (LNG) prices rose for the second straight week on robust demand from Asian buyers ahead of peak winter months and on supply concerns in Europe after delay in licensing the new Nord Stream 2 pipeline.

The average LNG price for January delivery into Northeast Asia rose to $36.7 per metric million British thermal units (mmBtu), up $5.2, or 16.5%, from the previous week, industry sources said.

"The delays to Nord Stream 2 have seen a bit of panic creep back into the market especially with the first signs of colder temperatures in Asia and with colder forecasts starting to hit in the U.S. as well," said Ryan McKay, commodity strategist at TDS securities.

On Tuesday, Germany's energy regulator suspended the approval process for Nord Stream 2, a major new pipeline bringing Russian gas into Europe, throwing up a new roadblock to the contentious project and driving up regional prices.

"Europe is entering its first extended cold period of the winter as is Northeast Asia, which could contribute towards a sharp reversal in prices (from the drop in November)," said Jamie Maddock, equity research analyst at Quilter Cheviot.

Asia looks better prepared for winter than Europe, so far, in terms of inventories. However, a repeated cold snap could lead to a buying spree similar to that seen in January that served as the catalyst to fire up prices.

Pacific LNG freight spot rates hit a fresh record high on Friday, with the cost of chartering a vessel to carry a shipment of the super-chilled fuel from Australia to Japan jumping to a record high of $335,000 per day, according to data intelligence firm Spark Commodities.

Atlantic LNG freight rates are still below the all-time high of $322,500 per day from Jan. 21.

In a rare market development, a U.S. LNG cargo on board Elisa Larus tanker diverted from Brazil to Britain's Isle of Grain, according to Refinitive Eikon data.

The diversion of the tanker, which has already arrived in Brazil, indicates that prices in Europe are attractive enough to soak cargoes away from other demand regions like Brazil, traders said.

Market players are also concerned that disruptions to expected deliveries due to outages in Malaysia and Australia could send Asian buyers back to the spot market.

Supply disruptions at Malaysia LNG indicate that up to three additional cargoes could be taken off the market each month from December to March, according to Rystad Energy analysts.

In addition, repairs of a gas leak at Gorgon LNG Train 1 in Australia could take up to three cargoes more out of the market during November-December, posing further upside risk to prices, they added.

[Tom Nolan + 2,441]

https://oilprice.com/Energy/Natural-Gas/US-Natural-Gas-Producers-Face-Billions-In-Hedging-Losses-In-2022.html

U.S. Natural Gas Producers Face Billions In Hedging Losses In 2022

By Rystad Energy - Nov 19, 2021, 5:00 PM CST

• US gas producers are set to book billions of dollars in hedging losses next year
• Most producers hedged 2022 production well before the recent energy crunch

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US gas producers are set to book billions of dollars in hedging losses next year because they hedged most of their 2022 production before the recent energy crunch caused gas prices to soar, a Rystad Energy analysis reveals.

The analysis zooms in on a peer group of shale-gas-focused producers that accounts for 35% of unconventional gas production and about 53% of shale gas production in the US Land region this year. These 11 operators stand to lose more than $5 billion in 2022 if the average Henry Hub price strip remains at $4 per MMBtu – an amount that could double if Henry Hub prices average $5 per MMBtu.

The reason behind the expected losses is that the operators had already hedged more than half of their 2022 production by the time they reported their second-quarter results, when prices were trading much lower than the currently inflated levels. By the end of September, as much as 64% of their projected production was hedged.

To complete the picture and look beyond our research group, tight-oil-focused producers tend to hedge a lower share of their associated gas production than our peer group of public gas-focused producers. The hedging profiles of private shale gas-focused operators vary widely, but on average they behave in line with the researched peer group. Gas producers focused on cash flow from proved developed producing (PDP) resources in conventional fields tend to hedge only a limited share of their production. Still, some have a high percentage of fixed-price sales with deliveries to local markets.

In terms of total volumes, the associated gas contracts of tight-oil-focused public producers would be about 50% lower than those of the shale-gas-focused peer group. Still, their typical hedging floor is somewhat higher based on their third-quarter earnings. For private operators, there is lower visibility, but significant Haynesville private names tend to hedge well in advance, indicating low hedging floors.

“Given that the whole strip for 2022 currently remains above $4 per MMBtu – though a strong backwardation is present in the shape of the curve – the current state of the programs is likely to impose a material downward pressure on corporate cash flows of gas producers next year,” says Artem Abramov, Head of Shale Research at Rystad Energy.

Into the peer group

The share of hedged production for 2022 ranges from 10-11% for Coterra to almost 95% for CNX Resources. However, Coterra and CNX are clear outliers as the rest of the group’s share of hedged production is in a narrow 45-75% range. The weighted-average floor price varies in the $2.5-$3.1 per MMBtu range in Henry Hub terms. At these prices, we anticipate a strong impact of the recent improvement in the Henry Hub strip on floor prices when operators report their full-year results. At least two operators are among those who added some hedges for 2022 that recently saw material gains in the average floor price: Range Resources increased the average floor by $0.30 per MMBtu, while Chesapeake raised its weighted-average floor by $0.20 per MMBtu between the two quarterly disclosures.

The significant rise in hedged volume since the second quarter of 2021 is primarily driven by a handful of operators – Southwestern, Chesapeake, Range and Comstock. The inclusion of Cimarex Energy, as a part of Coterra Energy, also boosted the total. The new entity inherited Cimarex’s natural gas hedges as Cabot alone did not have any derivatives position for 2022 as of the second quarter. In addition, key operator EQT Corp. has seemingly terminated some of its low-floor hedging positions for 2022 over the past few months.

Rystad Energy estimates that an average Henry Hub price of $4 per MMBtu in 2022 will result in a total hedging loss of $5.2 billion on gas derivative contracts alone for the 11 companies analyzed. For context, the peer group is estimated to generate around $48 billion in pre-hedged hydrocarbon gross sales before royalty, and about $21 billion of upstream cash from operations in 2022, before factoring in hedging losses. Hedging losses at a $4 per MMBtu strip will therefore be equivalent to more than 10% of the group’s pre-hedged revenue and account for more than 25% of cash from upstream operations. If the Henry Hub price averages at $5 per MMBtu next year, hedging losses for gas peers will be almost double – at $9.8 billion. These producers will need a Henry Hub price of $2.4 or lower to see material hedging gains of an amount greater than $1 billion.

By Rystad Energy

[Tom Nolan + 2,441]

https://oilprice.com/Energy/Energy-General/Brits-Google-Energy-Bill-Help-As-Energy-Suppliers-Go-Bankrupt.html

Brits Google ‘Energy Bill Help’ As Energy Suppliers Go Bankrupt

By City A.M - Nov 20, 2021, 12:00 PM CST

• Extreme gas price volatility has led to a string of bankruptcies among British energy suppliers
• UK Household gas bills have risen by 28.1 percent and electricity bills 18.8 percent in the year to October
• Germany’s recent decision to halt approval of the Nord Stream 2 pipeline has added to UK energy woes

[Tom Nolan + 2,441]

https://oilprice.com/Energy/Energy-General/LNG-Tanker-Rates-Reach-All-Time-Highs-On-Soaring-Demand.html

LNG Tanker Rates Reach All-Time Highs On Soaring Demand

By Tsvetana Paraskova - Nov 20, 2021, 6:00 PM CST

• Asia is stocking up on LNG inventory to avoid a repeat of last winter’s supply shortage.
• Surging demand for LNG and increased shipments of U.S. gas to Asia are sending spot LNG freight rates to new records. 
• Higher demand in Asia and a jump in U.S. exports to the region will likely keep the LNG tanker market tight throughout the winter.

Join Our Community

Asia is stocking up on liquefied natural gas (LNG) to avoid a repeat of last winter’s crunch when colder than usual temperatures sent 2020/2021 winter spot LNG prices to records.    

Now prices are even higher, but many Asian buyers are still on the spot market despite the expensive gas in the global energy crunch. Surging demand for LNG and increased shipments of U.S. gas to Asia, including China, are sending spot LNG freight rates in the Asia Pacific region to new records. 

This week, Pacific spot LNG freight rates jumped above $300,000 per day to a new record high, as rates in both the Pacific and Atlantic basins continued to move sharply higher, LNG freight assessor Spark Commodities said.

The spot price for LNG tankers to deliver fuel in December in the Pacific region jumped to an all-time high of $316,750 per day, up by 9 percent compared to the previous week. This beat the previous record for spot LNG rates set last winter when a cold snap in Asia drove LNG prices and freight rates to records. 

Those records were beaten in the past few weeks when spot LNG prices in Asia jumped to well above $30 per metric million British thermal units (MMBtu) last month. Now LNG freight rates have also exceeded last winter’s all-time highs and are five times higher than in early September. 

At the same time, the spot LNG freight rate in the Atlantic basin jumped by 5 percent from the previous week’s assessment to $254,250 per day this week, according to Spark Commodities data. 

Soaring prices and LNG demand started to push spot LNG freight rates to over $200,000 per day in October, as traders scrambled to book vessels to ship the fuel to energy-starved markets in Asia. LNG tanker rates more than doubled in October alone amid high demand for vessels in the energy crisis, industry sources told Reuters at the time. 

Higher demand in Asia and a jump in U.S. exports to the region, including to China, will likely keep the LNG tanker market tight throughout the winter, analysts and industry executives say.

“There has recently been more demand in Asia for U.S. LNG, but that also means more demand for ships to bring LNG to the Pacific,” Joseph Sigelman, CEO at gas and LNG logistics firm AG&P Group, told Bloomberg this week. 

“The situation for ships will remain tight through the rest of winter,” Sigelman added. 

Related: Demand Uncertainty Could Keep Oil From Breaking $100

Moreover, hoping to avoid a repeat of last year’s congestion in the Panama Canal, buyers in Asia are also booking LNG tankers to travel from the United States to Asia via the Cape of Good Hope, which is a longer voyage that further tightens the LNG vessel market, traders told Bloomberg.  

Near record U.S. exports of LNG and record shipments to China in recent months have also raised the demand for tankers to carry the super-chilled fuel to Asia. 

After a year without U.S. LNG shipments to China between March 2019 and February 2020, due to the trade war, American exports to China started rising toward the end of last year to reach a record high in August 2021, the latest available EIA data shows.  

In September 2021, China was the top destination of U.S. LNG exports, the U.S. Department of Energy’s LNG Monthly for November 2021 showed. China received 48.6 Bcf of U.S. LNG in September, followed by Brazil, South Korea, Spain, and Turkey. Those top five countries of destination accounted for 61.4 percent of all American LNG exports in September, according to the DOE data.

So far in November, the volume of gas feeding to U.S. LNG export facilities has been higher than in October and near the monthly record from April 2021, per Refinitiv data cited by Reuters. So far in November, the volumes of gas flowing to U.S. export plants have averaged 11.1 Bcf/d, up from 10.5 Bcf/d last month and slightly down from the April monthly record of 11.5 Bcf/d. 

By Tsvetana Paraskova for Oilprice.com

[Tom Nolan + 2,441]

https://oilprice.com/Energy/Energy-General/Prepare-For-Volatility-In-Natural-Gas-Markets.html

Prepare For Volatility In Natural Gas Markets

By Tsvetana Paraskova - Nov 22, 2021, 6:00 PM CST

• U.S. natural gas prices are set for a volatile winter, with the weather being the single biggest factor driving both demand and sentiment
• High prices and will eventually stimulate more production and drive prices down in 2022, but there is still plenty of upside this winter
• The volume of natural gas flowing to U.S. LNG export facilities was estimated to hit a record high last week 

Join Our Community

Volatility in U.S. natural gas prices is set to continue in the coming weeks and during the winter, as a number of both bullish and bearish factors will alternate to impact market sentiment and prices.  

Record American liquefied natural gas (LNG) exports are set to support the benchmark U.S. natural gas price at Henry Hub, while a resurgence in COVID cases in many parts of the United States and Europe could slow down gas demand if economies also slow amid newly imposed restrictions and lockdowns.  

Winter weather in the northern hemisphere is the biggest wild card for natural gas prices in the next few months. A colder than normal winter could propel prices higher as the tight European gas market will become even tighter, impacting prices elsewhere, especially in Asia. If Asia’s winter is also colder than usual, high prices are on the cards, driving up additional U.S. LNG exports because of the lower Henry Hub prices compared to the benchmarks in Europe and Asia. Sustained high American LNG exports are, in turn, tightening the U.S. market and driving the U.S. natural gas benchmark higher. 

U.S. exports of LNG have reached near-record levels in recent weeks amid record shipments to China in recent months. 

After a year without U.S. LNG shipments to China between March 2019 and February 2020, due to the trade war, American exports to China started rising toward the end of last year to reach a record high in August 2021, the latest available EIA data shows.  

So far in November, the volume of gas feeding to U.S. LNG export facilities has been higher than in October and near the monthly record from April 2021, per Refinitiv data cited by Reuters. So far in November, the volumes of gas flowing to U.S. export plants have averaged 11.1 Bcf/d, up from 10.5 Bcf/d last month and slightly down from the April monthly record of 11.5 Bcf/d. 

Donate Food To The Hungry This Thanksgiving

On Friday, November 19, the volume of gas flowing to U.S. LNG export facilities was estimated by Refinitiv to have hit an all-time high of 12.03 Bcf/d, up from the previous record of 11.99 Bcf/d from late March 2021. 

Due to near-record exports, U.S. natural gas futures rose by 6 percent in the week to November 19, following a 13-percent slump in the previous week, per Reuters estimates.

On Monday, November 21, prices opened lower and traded below $5 per million British thermal units (MMBtu), after they had settled above $5 on Friday. 

According to investing.com’s Satendra Singh, this week’s decisive point for the immediate direction of Henry Hub prices would be the level of $5.562/MMBtu, with a sustainable move above that level this week signaling a bullish trend and a sustainable move below suggesting possible sell-offs.  

Colder weather this week would support prices, as U.S. domestic natural gas demand is estimated by NatGasWeather.com to swing between moderate and high as a chilly weather system with rain and snow tracks across the Great Lakes and East early this week. 

U.S. natural gas prices averaged $5.51/MMBtu in October and are set to average $5.53/MMBtu from November through February, the EIA said in its latest Short-Term Energy Outlook (STEO). Prices were high in recent months because of inventories below the five-year average. 

Help Feed The Hungry This Thanksgiving

“Despite high prices, demand for natural gas for electric power generation has remained relatively high, which along with strong global demand for U.S. liquefied natural gas (LNG) has limited downward natural gas price pressures,” the EIA said. 

“We forecast that U.S. inventory draws will be similar to the five-year average this winter, and we expect that factor, along with rising U.S. natural gas exports and relatively flat production through March, will keep U.S. natural gas prices near recent levels before downward price pressures emerge,” according to the U.S. administration. 

Price pressures downwards will emerge next year as high prices now incentivize more production, but throughout this winter—especially if it’s a colder-than-usual one from America to Europe and Asia – natural gas prices have room to rally further. 

By Tsvetana Paraskova for Oilprice.com

More Top Reads From Oilprice.com:

• How A Biden SPR Release Will Send Oil Prices Even Higher In 2022
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[Tom Nolan + 2,441]

https://www.zerohedge.com/weather/cold-snap-sweeps-across-china-fears-energy-crisis-reemerge

Cold Snap Sweeps Across China As Fears Of Energy Crisis Reemerge

by Tyler Durden

Monday, Nov 22, 2021 - 06:00 PM

A massive cold blast is sweeping across most parts of China, unleashing snow, mixed precipitation, and dangerous wind. China's energy crisis eased last month but could soon be ignited again by wicked winter weather. 

According to the website weather.com.cn, which the China Meteorological Administration runs, more than 100 weather alerts are issued for the country as record-breaking cold temperatures spread further and further south. 

The latest forecast shows a cold air mass has descended on the county. 

By Sunday morning, a cold wave stretched from the west of Hebei province to the west of Henan province, causing temperature drops of between 4 C and 8 C in Shanxi province and Hebei, the center said. The Xinjiang Uygur autonomous region and parts of Gansu province also experienced temperature slumps of more than 10 C.

On Monday, the cold air is expected to rapidly descend southward and affect most of the central and eastern parts of China, the center forecast.

By Tuesday, the Bohai, Yellow, and East China seas will face strong winds of up to about 100 kilometers per hour, it said.

The winds are expected to carry floating sand and dust to northern areas, including Beijing.

Snow was forecast to hit the northeast from Sunday to Wednesday, with blizzards expected in Heilongjiang and Jilin provinces, the center said.

New snow accumulation over the period is expected to reach up to 40 centimeters in Heilongjiang, adding to snow from last week.

On Sunday, the Heilongjiang provincial government announced a Level II warning for weather disaster emergency response, the second-highest in a four-tier warning system.

Fang Chong, the chief forecaster of the Central Meteorological Observatory, said a cold air mass is pouring into China from Siberia, Russia

"This bout of cold wave will sweep across China faster than the previous one in early November because airflow is stronger under the current weather conditions," Chong said. "The weather system is more complicated than before, with blizzards, rain, sand, and dust finding their paths in North and South China."

The world's No 2 economy suffers from a severe energy crunch as coal and natural gas are in short supply. The government spent the last month ramping up the production of energy supplies in anticipation of cold weather. It also intervened in energy markets to suppress prices for power plants. 

Unseasonably cold weather could spark the next round of coal shortages that would have severe knock-on effects throughout supply chains. 

Even though China's energy crisis has been eased, the government must continue stockpiling energy supplies to avoid electricity shortages amid rising demand. 

A freezing winter could spell disaster for China's economy if it doesn't have enough energy supplies. 

[Tom Nolan + 2,441]

https://oilprice.com/Energy/Crude-Oil/Why-US-Shale-Is-Refusing-To-Reinvest.html

U.S. Shale Is Refusing To Reinvest Despite Record High Cash Flow

By Rystad Energy - Nov 22, 2021, 5:00 PM CST

• U.S. shale producers saw reinvestment rates hit an all-time low in the third quarter and saw record levels of free cash flow 
• A group of 21 public U.S. shale companies that are expected to produce 40% of 2021 output had a reinvestment rate of 46%
• Despite seeing the strongest cash flow from operations since the second quarter of 2019, these shale producers’ capital expenditure was remarkably low

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Reinvestment rates among US shale oil producers hit an all-time low in the third quarter of 2021, resulting in a record free cash flow for the quarter, and are projected to fall even lower by year-end according to a Rystad Energy analysis. The analysis focused on a peer group of 21 public US shale oil producers, excluding majors, that together account for 40% of the expected 2021 output.

The peer group’s combined reinvestment rate in the third quarter of 2021 was 46%, down from 53% over the same period in 2020 and way lower than the historical average of above 130%. The reinvestment rate is calculated by comparing shale producers’ oil and gas capex against their cash flow from operations (CFO). The CFO of the last quarter was the strongest since the second quarter of 2019.

The analysis shows $7 billion in underspending by shale producers over the third quarter of 2021, comparing oil and gas capex with CFO. Operators managed to slightly increase peer-group quarterly capex in this year’s third quarter to $5.9 billion, up from $5.3 billion in the previous quarter, while further increasing CFO to $12.8 billion. All but one operator balanced spending in the third quarter of this year, reaching a new level of industry-wide cash balancing.

“Such a low reinvestment rate stands out for shale industry observers, especially as the peer group reported a record-breaking free cash flow (FCF) and earnings before interest, tax, depreciation and amortization (EBITDA) of $6 billion and $16 billion, respectively. But it’s not the end of the reinvestment slide,” says Alisa Lukash, vice president for North American shale at Rystad Energy.

Rystad Energy projections show that reinvestment will fall further to 40% in the fourth quarter of 2021. Also, for the first time since late 2018, the group’s combined net debt dropped below the eight-year average floor of $52 billion, coming in at $51 billion for the third quarter. Additionally, leverage ratios continued their consistent decline in keeping with the past three quarters.

Third-quarter results show several large independent operators ramped up spending in line with another financially robust quarter, in part due to the strong recovery in West Texas Intermediate (WTI) crude prices. Operators, as expected, started to communicate 7% to 15% cost inflation, with much of the impact anticipated to come in early 2022. However, this is expected to be absorbed by improved well productivity and capital efficiencies in most cases.

Combined third-quarter net income for the peer group amounted to $5.3 billion, double the income earned in the second quarter of 2021 and significantly higher than the sizable losses of $6 billion and $2.1 billion in the third and fourth quarters of 2020, respectively. EBITDA, meanwhile, recovered to $16.3 billion in this year’s third quarter, a level not seen historically. FCF across the peer group was $5.6 billion, a rise of $500 million from the previous quarter and more than double the $2.5 billion seen in last year’s final quarter.

Dividend payments jumped by 70% for the peer group in this year’s third quarter versus the second quarter. In comparison, the actual dividend-to-capex ratio increased to 26% compared to 17% in the preceding quarter. Further capital spending control by the industry was aimed at deleveraging and garnering stable shareholder support. Stock buybacks have predominantly been paused as the market recovered naturally with the WTI price increase. However, a few companies (CLR, FANG, PDCE) initiated buybacks amounting to $200 million.

For the first time since late 2018, the peer group dropped combined net debt below the eight-year average floor of $52 billion, reporting $51 billion for this year’s third quarter. Many operators mentioned revised hedging plans for 2022 due to lower expected leverage. Both leverage ratios – total debt to assets and total debt to equity – have consistently declined during the last three quarters. Despite more robust stock prices driving total equity up in 2021, the decline in leverage ratios has been partly offset by consistent debt issuance flared by merger and acquisition opportunities in the shale sector.

By Rystad Energy for Oilprice.com

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British Gas Swoops In To Save Stranded Customers From Energy Crisis

By City A.M - Nov 22, 2021, 12:30 PM CST

British Gas has swooped in to supply stranded customers from collapsed energy firms Neon Reef and Social Energy. 

It will onboard all 35,500 domestic consumers from both companies.

This switchover is part of Ofgem’s Supplier of Last Resort (SOLR) process.

 

The two firms ceased trading last week.

British Gas will get in touch with former customers from Neon Reef and Social Energy over the coming weeks to help them switch over.

They will need to take a meter reading and provide this to British Gas to make sure they are billed accurately.

Chris O’Shea, group chief executive of British Gas’ parents company, Centrica.

He said: “We welcome customers of Neon Reef and Social Energy to British Gas, and we’ll ensure the switchover is as smooth as possible. We’re a brand trusted by millions and our new customers will benefit from the range of advantages that come with being a British Gas customer, including access to exclusive offers on services like boiler cover, Hive products and British Gas Rewards.”

Nearly two million customers have been moved through supplier of last resort processes since September, with 21 energy firms ceasing trading in the past three months.

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Approximately 500,000 have been taken on by British Gas.

Meanwhile, Bulb – the UK’s seventh biggest energy firm with 1.7 million customers – has ceased trading.

The average consumer price cap remains set at £1,277 per year for average use, while soaring wholesale costs have risen 250 per cent over the course of the year.

This has left energy suppliers facing hefty losses from both taking on domestic consumers and in maintaining their own businesses.

Scottish Power CEO Keith Anderson recently called for price cap reforms, fearing the market could return to a Big Six scenario.

By City AM

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https://www.zerohedge.com/commodities/gazprom-halt-gas-flows-moldova-48-hours-over-non-payment

Gazprom Will Halt Gas Flows To Moldova In 48 Hours Over Non-Payment

by Tyler Durden

Tuesday, Nov 23, 2021 - 05:45 AM

European natural gas prices could surge as new reports indicate Gazprom will halt all natural gas flows to Moldova, an Eastern European country, in 48 hours over non-payment for its gas consumption. The news follows Germany's energy regulator, which suspended the approval process for the Nord Stream 2 pipeline last week. Russian President Vladimir Putin continues to exert pressure on Europe with declining gas flows amid the onset of the Northern Hemisphere winter. 

The crux of the issue is that Moldova has yet to pay its energy bill to Gazprom. "Today is the scheduled date of payment. Yet, there is no payment," Sergey Kupriyanov, Gazprom board chairman's spokesman, said in a statement, according to RT News. He said the company is "extremely disappointed" in Moldova's failure to fulfill its obligations on its recently extended energy contract. 

 

Gazprom was expecting payment for Moldova's gas usage on Monday (Nov. 22). This comes after Chisinau, the capital of Moldova, struck a 5-year deal with the gas producer on Nov. 1. 

Kupriyanov said Gazprom attempted to set "market gas price" for Moldova but had to then take into account the "difficult economic and financial situation" in the country and Putin's position. In the deal, he said most of Chisinau's terms were reached, including a special discounted price. 

Moldova was only to pay for its current consumption, the spokesman said, adding that Chisinau is in breach of contract, forcing Gazprom to suspend gas flows. The contract extension comes as Chisinau has mounting unpaid gas bills with Gazprom. 

According to RT, before the Nov. 1 deal was signed, "Chisinau was close to introducing a state of emergency in case of failed talks. The tense situation also sparked some allegations that Moscow sought to exert pressure on Chisinau to break up its deal with the EU. Gazprom repeatedly denied such claims, arguing that it simply can't afford to make a loss on the deal." 

Moldova not paying its bills comes as Germany's energy regulator unexpectedly suspended a crucial step in the approval process for the Nord Stream 2 pipeline last week. Dutch month-ahead gas, the European benchmark, soared last week on the news as that Nord Stream 2 pipeline might not get approved by the expected January timeframe but more likely after the cold season. 

The scarcity of gas in Europe continues to place a bid under prices as it deals with some of the lowest gas storage levels since 2013, ahead of what could be a nasty winter. As much as European officials oppose Russian gas, the continent desperately needs Gazprom to survive this winter. As for Moldova, if gas is shut off in the next 48 hours, the country might declare a state of emergency. 

[Tom Nolan + 2,441]

https://community.oilprice.com/topic/24893-visualizing-eagle-ford-oil-gas-production-through-august-2021/

 

 

[Tom Nolan + 2,441]

https://www.zerohedge.com/commodities/european-gas-prices-jump-us-announces-nord-stream-2-sanctions

European Gas Prices Jump As US Announces Nord Stream 2 Sanctions

by Tyler Durden

Tuesday, Nov 23, 2021 - 09:02 AM

On Tuesday, European natural gas futures jumped after the U.S. imposed new sanctions on the highly contested Nord Stream 2 pipeline. 

U.S. Secretary of State Antony Blinken issued a statement on Monday describing the new round of sanctions targeting a vessel and a "Russian-linked entity" called Transadria Ltd. associated with the pipeline's construction that allows natural gas flows from Russia directly to Germany. 

Blinken said a report had been sent to Congress and the sanctions support Protecting Europe's Energy Security Act of 2019. There's been a lot of concern over Moscow's ability to leverage natural gas supplies over Europe. 

"Today's report is in line with the United States' continuing opposition to the Nord Stream 2 pipeline and the U.S. Government's continued compliance with PEESA," Blinken said in his statement. "With today's action, the Administration has now sanctioned 8 persons and identified 17 of their vessels as blocked property pursuant to PEESA in connection with Nord Stream 2."

"Even as the Administration continues to oppose the Nord Stream 2 pipeline, including via our sanctions, we continue to work with Germany and other allies and partners to reduce the risks posed by the pipeline to Ukraine and frontline NATO and E.U. countries and to push back against harmful Russian activities, including in the energy sphere," Blinken said.

Any action against the Nord Stream 2 has stoked higher natural gas prices in Europe. After the U.S. announced sanctions, the Dutch month-ahead gas, the European benchmark, increased as much as 8.7% to 91.34 euros a megawatt-hour. 

Kremlin spokesperson Dmitry Peskov said the move by the U.S. to sanction a ship involved in the pipeline construction is "illegal and wrong." He said, "We view this extremely negatively." 

Nord Stream 2 is one of several undersea pipelines that Russia has laid in the Black Sea and Baltic Sea to replace old pipelines that run through eastern Europe. The move to reshuffle supplies could allow Moscow to target eastern Europe and western Europe energy flows. 

Natural gas flows on the controversial pipeline have yet to begin and suffered a significant setback last week after the German energy regulator suspended the certification process. Even though the lines are filled with natural gas, the latest hurdles could suggest gas will not be flowing during the Northern Hemisphere winter amid Europe's lowest gas storage levels since 2013. 

Europe is hungry for more gas. If E.U. politicians want to remain in power by not upsetting their constituents over soaring energy inflation, they might have to rely on Moscow, a move that would infuriate Washington. 

[Tom Nolan + 2,441]

https://oilprice.com/Energy/Energy-General/Asia-Is-Facing-A-Long-Tern-Natural-Gas-Crunch.html

Asia Is Facing A Long-Term Natural Gas Crunch

By Tsvetana Paraskova - Nov 25, 2021, 6:00 PM CST

• Asia has seen a run in natural gas supplies, and prices are simply not easing up.
• Asia’s problem with natural gas supplies may not be limited to this winter alone.
• Asia’s natural gas demand is set to nearly double by 2050, and the region’s production is already declining.

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Asian natural gas buyers have had to pay record prices for LNG cargoes in recent weeks, as the global energy crunch sent spot prices skyrocketing amid scarce supply. But Asia’s problem with natural gas supplies may not be limited to this winter alone—and even a scenario where the world manages to pull off its climate change goals could see Asia short on nat gas.

Prices have eased somewhat since the all-time highs in October, but demand for natural gas in Asia will continue to rise not only this winter but in all winters and summers going forward, as the region expands the coal-to-gas switch and needs more gas for baseload capacity as it expands power generation from renewable energy sources. 

Asia’s natural gas demand is set to nearly double by 2050, and it will be the region that will drive gas consumption growth globally, even if Europe begins to shun natural gas at some point in the next decade or two because of environmental concerns about emissions in the gas supply chain and the net-zero ambitions of the UK and the European Union. 

With constantly growing natural gas demand, Asia could face gas crunches in the years and decades ahead, too. Local gas production is falling with the exception of China in the near term, Wood Mackenzie said in an analysis this week. The Asian region needs incentives and investments in domestic supply if it is to avert the next gas crisis and cater to its energy security, WoodMac notes. 

Higher dependence on LNG imports exposes China, India, Southeast Asia, and other major energy-importing countries in the region even more to the volatility of the gas markets. 

Asia’s Gas Demand Is Only Going To Rise 

Natural gas demand in Asia is rebounding from last year’s lows and is expected to rise by 7 percent this year, predominantly led by China, which alone accounts for 73 percent of the net growth in demand, the International Energy Agency (IEA) said in its Gas Market Report Q4 2021. 

In 2022, Asia’s gas demand growth is set to remain strong at 5 percent, led by China, emerging Asia, and India, which would account for 65 percent, 28 percent, and 11 percent of the net demand growth in Asia, respectively, the agency added. 

In the medium and long term, gas demand in Asia will continue to rise, even in a scenario in which the world manages to limit global warming to 2 degrees Celsius above pre-industrial levels, WoodMac says. 

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Per the energy consultancy’s base-case scenario, gas demand in Asia is set to nearly double by 2050 to around 140 billion cubic feet per day. Even under Wood Mackenzie’s Accelerated Energy Transition Scenario with a temperature rise limited to 2 degrees Celsius, demand will be almost as strong as in the base-case scenario. 

“This robust demand will be driven by coal-to-gas switching as well as a need to underpin intermittent renewables generation. Unless domestic gas production can be ramped up, the demand for imported LNG in the region will continue to rise,” wrote Angus Rodger, Research Director, Asia Pacific, at Wood Mackenzie. 

Asia’s Natural Gas Production Is Declining

The outlook of Asian production of natural gas is “gloomy” in WoodMac’s base-case scenario.

As much as 25 trillion cubic feet worth of projects are currently struggling to progress to final investment decision (FDI), while exploration activity and capital expenditures in Asia’s gas resources are declining, the consultancy noted. 

Only China is set to see increased gas production, but possibly only in the near term, Wood Mackenzie noted. 

China’s Gas Output Growth Lags Surge In Demand

Per government orders, China’s natural gas production has been rising this year as state energy giants pump more gas. However, growth in production is slower than the growth in Chinese gas demand. 

For example, China’s natural gas production between January and October rose by 9.4 percent compared to 2020 and by 19.2 percent compared to 2019, Xinhua news agency reported last week, citing the National Bureau of Statistics (NBS). In October alone, Chinese gas production inched up by 0.5 percent year over year.

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However, China’s natural gas demand this winter is set to rise by 10 percent compared to last winter, a PetroChina official said last month. 

China has also bet on developing its vast shale gas resources to boost its domestic natural gas supply. Despite recent shale production surprises to the upside, China still has several major challenges to overcome if it were to replicate, at least partially, the American shale boom. Those challenges include ultra-deep shale gas wells, difficult geology, terrain constraints, and weak well economics of drilling super-deep shale gas wells. 

Asia’s LNG Dependence Set To Grow

Apart from China, other Asian countries with gas reserves are not expected to soon see a rise in their domestic production, which would lead to a surge in LNG imports, according to WoodMac’s base-case scenario.

“More new discoveries and developments are needed to slow the rising rate of LNG dependency. But if that fails to happen, and gas output falls faster than expected, even more imported LNG will be needed — up to 240 million tonnes per year more by our estimates,” the consultancy noted. 

Considering the volatility of the LNG markets, Asia—the key growth driver of gas demand in the world—needs long-term solutions to meet its gas demand and enhance its energy security. 

By Tsvetana Paraskova for Oilprice.com

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https://www.zerohedge.com/weather/german-power-prices-soar-arctic-blast-brings-snow

German Power Prices Soar As Arctic Blast To Bring "Significant Snow" 

by Tyler Durden

Thursday, Nov 25, 2021 - 06:55 AM

Europe's first cold spell of the heating season has arrived, pressuring power prices higher as freezing temperatures ushers in increased power demand to heat building structures across the central-west region. 

German day-ahead power prices jumped to the second-highest level ever, 273.89 euros per megawatt-hour. Day-ahead power prices are also higher in France and Netherlands. 

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