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"Natural Gas Price Fundamental Daily Forecast – Grinding Toward Summer Highs Despite Huge Short Interest" by James Hyerczyk & REUTERS on NatGas

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Friday Sept 2nd

EU Natural Gas

Natural gas prices in Europe fell further to €212 per megawatt hour, the lowest in three weeks and are more than 30% below record levels of near €317 hit last week as gas flows through the Nord Stream pipeline are set to resume as planned on Saturday, at the same level as before the repairs. Additionally, Germany said at the start of the week that its gas storage facilities are set to be 85% full by next month, earlier than the October target. In spite of the relief, for now, supplies remain scarce and the outlook heading into the winter is still very uncertain. Gazprom reduced flows through the key pipeline to roughly 20% in July and warned the link’s entry point must undergo technical maintenance every 42 days. And Norway, which has overtaken Russia as the biggest gas supplier to Europe in the wake of the war in Ukraine, will curtail its gas exports amid planned and unplanned maintenance at 13 fields and processing plants throughout September.

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

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https://oilprice.com/Energy/Natural-Gas/European-Comission-Calls-For-Price-Cap-On-Russian-Natural-Gas.html

European Commission Calls For Price Cap On Russian Natural Gas

By Irina Slav - Sep 02, 2022, 10:00 AM CDT

  • European Commission head Ursula von der Leyen is calling for a price cap on Russian pipeline natural gas.
  • According to the EC head, such a price cap would interfere with President Vladimir Putin’s attempts to manipulate the European energy market. 
  • "A gas price cap can be proposed at European level, and there also is a legal foundation at European level to skim profits temporarily as an emergency measure at a time of crisis."

The European Union needs to impose a price cap on Russian pipeline gas, the President of the European Commission Ursula von der Leyen said today.

According to the EC head, such a price cap would interfere with President Vladimir Putin’s attempts to manipulate the European energy market, Reuters reported.

"I firmly believe that it is now time for a price cap on Russian pipeline gas to Europe," von der Leyen said, adding that, "A gas price cap can be proposed at European level, and there also is a legal foundation at European level to skim profits temporarily as an emergency measure at a time of crisis."

The idea of taxing the profits of energy companies in Europe has been gathering momentum in recent weeks.

Gas flows from Russia to Europe have been significantly reduced over the last couple of months, with Russia explaining the reduction with technical issues, notably the absence of enough turbines for compressor stations along the way.

The EU has countered with claims that Russia is using gas as an energy weapon against Europe.

Currently, the biggest conduit of Russian gas for Europe, Nord Stream 1, is operating at 20% capacity. The pipeline ws this week shut down for a three-day maintenance round, due to restart in the early hours of Saturday, again at 20% capacity.

Von der Leyen’s call for a gas price cap comes as G7 discusses a price cap on Russian oil exports in a bid to curb Moscow’s oil revenues, which the group says would force it to end the war in Ukraine.

Moscow, meanwhile, declared that it would stop selling oil to countries that have implemented an oil price cap

"Companies that impose a price cap will not be among the recipients of Russian oil," Kremlin spokesman Dmitry Peskov said today, echoing a statement made yesterday by Deputy Prime Minister Alexander Novak.

By Irina Slav for Oilprice.com

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https://oilprice.com/Energy/Natural-Gas/Why-Europes-Dependence-On-US-LNG-Is-Risky.html

Why Europe’s Dependence On U.S. LNG Is Risky

By Alex Kimani - Sep 05, 2022, 12:00 PM CDT

  • Europe’s desperate attempt to rid itself of Russian gas became even more urgent this week.
  • U.S. LNG supplies might not be vulnerable to Russia, but they are vulnerable to extreme weather.
  • Scientists say the Gulf coast hurricanes are becoming increasingly severe.

In the current year, the United States boasts status as the world's biggest liquefied natural gas (LNG) exporter as deliveries to both Europe–in the throes of a severe energy crisis–and Asia surge. So far in 2022, five developers have signed over 20 long-term deals to supply more than 30 million metric tons/year of LNG or roughly 4 Bcf/d, to energy-starved buyers in Europe and Asia. 

Europe’s desperate attempt to rid itself of Russian gas became even more urgent this week, as Moscow announced that flows through Nord Stream 1 to Germany would remain cut off until the West lifted sanctions. That desperation has resulted in Europe displacing Asia as the top destination for U.S. LNG. In fact, Europe now receives 65% of total U.S. LNG exports But there are growing concerns that trading one dependency for another carries another kind of risk. Putting all your eggs in the U.S. LNG basket means banking on Mother Nature. U.S. LNG supplies might not be vulnerable to Russia, but they are vulnerable to extreme weather and harrowing hurricane seasons that disrupt output and exports. Europe cannot afford any more disruptions. 

Vulnerability in the Gulf of Mexico

The bulk of LNG export facilities in the United States--including proposed facilities--are housed along the Gulf Coast, and much of the gas that feeds those facilities comes from nearby inland reserves, from New Mexico and Texas to Louisiana, and beyond. This is a region prone to hurricanes, meaning that when hurricanes come roaring inbound, everything from liquefaction to shipping and extraction to processing is at risk of disruption.

It has happened before–and recently.

In recent years, multiple hurricanes have resulted in varying degrees of disruption for the LNG market, with impacts stretching across the supply chain from brief outages to long layoffs of processing and shipping. 

Hurricane Laura in 2020 resulted in a two-week disruption at the Sabine Pass LNG export facility and well over a month at Cameron LNG. 

Last year, Hurricane Ida resulted in a major and long-lasting curtailment of offshore gas production. 

This year, a June explosion at the Texas-based Freeport LNG facility knocked nearly 20% of US LNG export capacity offline, sending LNG markets into a tailspin. 

Related: OPEC+ Cuts Production Despite Resistance From Russia

Scientists say the Gulf coast hurricanes are becoming increasingly severe, causing record-breaking compound flooding and placing critical infrastructure at risk.

Meanwhile, whereas the United States has the world’s largest lineup of new LNG projects in the works, there are also limits to how far this can go without more pipeline capacity to accommodate this wildly expanding energy segment. 

In the Appalachian Basin, the country’s largest gas-producing region churning out more than 35 Bcf/d, environmental groups have repeatedly stopped or slowed down pipeline projects and limited further growth in the Northeast. This leaves the Permian Basin and Haynesville Shale to shoulder much of the growth forecast for LNG exports. Indeed, EQT Corp. (NYSE: EQT) CEO Toby Rice recently acknowledged that Appalachian pipeline capacity has “hit a wall.”

Analysts at East Daley Capital Inc. have projected that U.S. LNG exports will grow to 26.3 Bcf/d by 2030 from their current level of nearly 13 Bcf/d. For this to happen, the analysts say another 2-4 Bcf/d of takeaway capacity would need to come online between 2026 and 2030 in the Haynesville.

This assumes significant gas growth from the Permian and other associated gas plays. Any view where oil prices take enough of a dip to slow that activity in the Permian and you’re going to have even more of a call for gas from gassier basins,” the analysts have said.

Mozambique To The Rescue

Though it may be rather late in the game, Europe is beginning to seriously consider Africa for its future energy supplies. Most notably, Mozambique is poised to ship its first cargo of liquefied natural gas (LNG) to Europe at this critical time. 

This, too, is fraught with vulnerabilities in the form of political instability and insurgency. 

French TotalEnergies’ Mozambique LNG project has been sidelined by insurgency. Italian Eni’s Coral-Sul FLNG is safe from the violent flashpoint and on track to help serve Europe, with BP already having inked a deal to buy all of the output for 20 years from the $7-billion Coral-Sul project, designed to produce 3.4 million metric tons of LNG. The Italian company is already planning a second floating export platform in the southern African country that could be completed in less than four years. 

But nothing is certain here.

In the heart of the insurgency, TotalEnergies has announced plans to resume its massive $20 billion project toward the end of the year, with the terminal expected to churn out 13.1 million tons of LNG annually. That is, if it ever gets past the insurgency that led to a declaration of force majeure. The project hopes to restart in the first half of next year.  

Optimism runs high, despite all. ExxonMobil says it will make a final decision for an even larger project in the near future. Meanwhile, the European Union has planned a five-fold increase in financial support to $15 million to fight militants near Mozambique’s gas projects. The EU has already pledged to provide the country's army with an additional 45 million euros ($45 million) of financial support, and has so far given a SADC mission in the country 2.9 million euros of funding.

Over the short-term, Europe is making headway in filling up its gas storage, and is now nine weeks ahead of where it was this time last year–even if it has come at a hefty premium. European gas storage levels are above 70%, and have even surpassed the 5-year average, according to data from Gas Infrastructure Europe (GIE). 

By November 1st, the EU will likely hit 80% natural gas storage capacity--just in time for peak winter demand. Germany is even aiming for 95% capacity, and is already at 85%

"The EU already surpassed its September 1 interim filling target in early July and is still on pace to reach the November 1 target," Jacob Mandel, senior associate for commodities at Aurora Energy Research, has told Reuters. Indeed, analysts at Standard Chartered Plc are saying that President Vladimir Putin’s gas weapon will be effectively blunted by the inventory build, with Europe set to go through winter “comfortably” without Russian gas.

This, however, poses two different problems. First, Europe will have to pay a heavy price: the cost of replenishing natural gas stocks is estimated at over 50 billion euros ($51 billion), 10 times more than the historical average for filling up tanks ahead of winter. Second, the bloc can’t survive on storage alone unless it severely reduces consumption for the winter. 

Europe, as it stands, is vulnerable on every energy front, and if it’s not geopolitics and insurgency, it’s Mother Nature at her wildest. 

By Alex Kimani for Oilprice.com

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Sept 6th Tuesday U.S. - NOTE:  At 1pm Central time gas had fallen about 61/2 %

https://www.reuters.com/article/usa-natgas/u-s-natgas-futures-drop-4-to-near-4-week-low-on-record-output-idUKL1N30D0RT

U.S. natgas futures drop 4% to near 4-week low on record output

By Reuters Staff

Oil Report
September 6, 202210:41 AMUpdated 3 hours ago
    Sept 6 (Reuters) - U.S. natural gas futures fell about 4% to a near four-week low on Tuesday as output
soared to a record high over the weekend and on forecasts for lower demand next week than previously expected.
    In the U.S. West, meanwhile, spot power prices for Tuesday jumped in California and other states to their
highest since California's electric grid operator imposed rotating outages in August 2020 as a brutal heat
wave baked the drought-stricken region for more than a week.
    California's grid operator urged consumers to conserve energy for a seventh day in a row on Tuesday as the
heat strains the grid and significantly increases the likelihood of rotating outages. 
    The decline in futures prices also came as the ongoing outage at the Freeport liquefied natural gas (LNG)
export plant in Texas leaves more gas in the United States for utilities to inject into stockpiles for next
winter.
    Freeport, the second-biggest U.S. LNG export plant, was consuming about 2 billion cubic feet per day
(bcfd) of gas before it shut on June 8. Freeport LNG expects the facility to return to at least partial
service in early to mid November.
    Front-month gas futures fell 35.7 cents, or 4.1%, to $8.429 per million British thermal units
(mmBtu) at 11:17 a.m. EDT (1517 GMT), putting the contract on track for its lowest close since Aug. 10.
    Last week, gas speculators boosted their net short futures and options positions on the New York
Mercantile and Intercontinental Exchanges for the first time in three weeks to their highest since August,
according to the U.S. Commodity Futures Trading Commission's Commitments of Traders report.
    So far this year, gas futures were up about 126% as higher prices in Europe and Asia keep demand for U.S.
LNG exports strong. Global gas prices have soared due to supply disruptions and sanctions linked to Russia's
Feb. 24 invasion of Ukraine.
    Gas was trading around $67 per mmBtu in Europe and $55 in Asia.
    Russian gas exports via the three main lines into Germany - Nord Stream 1 (Russia-Germany), Yamal
(Russia-Belarus-Poland-Germany) and the Russia-Ukraine-Slovakia-Czech Republic-Germany route - averaged just
1.4 bcfd so far in September, down from 2.5 bcfd in August and 10.8 bcfd in September 2021.

    
    TOP PRODUCER
    U.S. gas futures lag far behind global prices because the United States is the world's top producer with
all the fuel it needs for domestic use, while capacity constraints and the Freeport outage prevents the
country from exporting more LNG.
    Data provider Refinitiv said average gas output in the U.S. Lower 48 states rose to 99.7 bcfd so far in
September from a record 98.0 bcfd in August.
    With cooler weather coming, Refinitiv projected average U.S. gas demand, including exports, would slide to
92.3 bcfd next week from 96.8 bcfd this week. The forecast for next week was lower than Refinitiv's outlook on
Friday before the U.S. Labor Day holiday on Monday.
    The average amount of gas flowing to U.S. LNG export plants rose to 11.2 bcfd so far in September from
11.0 bcfd in August. That compares with a monthly record of 12.9 bcfd in March. The seven big U.S. export
plants can turn about 13.8 bcfd of gas into LNG.
    The reduction in exports from Freeport is a problem for Europe, where most U.S. LNG has gone this year as
countries there wean themselves off Russian energy.
    Gas stockpiles in northwest Europe - Belgium, France, Germany and the Netherlands - were
about 4% above their five-year (2017-2021) average for this time of year, according to Refinitiv. Storage was
currently around 83% of capacity.
    That is much healthier than U.S. gas inventories, which were still about 11% below their five-year norm.

    
                                              Week ended     Week ended     Year ago   Five-year        
                                                  Sep          Aug 26        Sep 2      average    
                                              2(Forecast)     (Actual)                   Sep 2     
 U.S. weekly natgas storage change (bcf):         +52            +61          +48         +65           
 U.S. total natgas in storage (bcf):             2,692          2,640        2,916       3,043          
 U.S. total storage versus 5-year average       -11.5%         -11.3% Global Gas Benchmark Futures ($ per mmBtu)   Current Day     Prior Day    This Month  Prior Year   Five Year
                                                                           Last Year    Average      Average
                                                                                          2021     (2017-2021)
 Henry Hub                                       8.39           8.78          5.11        3.73        2.89
 Title Transfer Facility (TTF)                   64.48          71.42        22.61       16.04        7.49
 Japan Korea Marker (JKM)                        55.25          59.16        23.35       18.00        8.95 Refinitiv Heating (HDD), Cooling (CDD) and Total (TDD) Degree Days                                     
 Two-Week Total Forecast                      Current Day     Prior Day    Prior Year   10-Year      30-Year
                                                                                          Norm        Norm
 U.S. GFS HDDs                                    11              7            6           20          26
 U.S. GFS CDDs                                    155            174          151         144          128
 U.S. GFS TDDs                                    166            181          157         164          154 Refinitiv U.S. Weekly GFS Supply and Demand Forecasts                                                  
                                              Prior Week    Current Week   Next Week   This Week    Five-Year
                                                                                       Last Year   Average For Month 
 U.S. Supply (bcfd)
 U.S. Lower 48 Dry Production                    98.4           99.4          99.7        91.9        87.0
 U.S. Imports from Canada                         7.7            7.7          7.3         8.1          7.7
 U.S. LNG Imports                                 0.0            0.0          0.0         0.0          0.1
 Total U.S. Supply                               106.1          107.1        107.0       100.0        95.8 U.S. Demand (bcfd)                                                                                     
 U.S. Exports to Canada                           2.1            2.0          2.0         2.6          2.4
 U.S. Exports to Mexico                           5.6            5.5          5.6         5.9          5.3
 U.S. LNG Exports                                10.8           11.2          10.4        11.0         4.9
 U.S. Commercial                                  4.5            4.5          4.7         4.6          4.9
 U.S. Residential                                 3.6            3.6          3.8         3.7          3.9
 U.S. Power Plant                                42.0           41.5          37.5        33.9        33.2
 U.S. Industrial                                 21.3           21.4          21.3        20.8        21.2
 U.S. Plant Fuel                                  4.9            4.9          4.9         4.9          4.9
 U.S. Pipe Distribution                           2.1            2.1          2.0         2.1          2.1
 U.S. Vehicle Fuel                                0.1            0.1          0.1         0.1          0.1
 Total U.S. Consumption                          79.5           78.1          74.3        70.1        70.3
 Total U.S. Demand                               98.1           96.8          92.3        89.6        82.9 U.S. weekly power generation percent by fuel - EIA                                                
                                              Week ended     Week ended    Week ended  Week ended  Week ended
                                                 Sep 9          Sep 2        Aug 26      Aug 19      Aug 12
 Wind                                              6              7            5           6            6
 Solar                                             3              3            3           3            3
 Hydro                                             5              5            6           6            5
 Other                                             2              2            2           2            2
 Petroleum                                         0              0            0           0            0
 Natural Gas                                      45             44            44          42          45
 Coal                                             21             21            22          22          22
 Nuclear                                          19             17            18          19          17 SNL U.S. Natural Gas Next-Day Prices ($ per mmBtu)
 Hub                                          Current Day     Prior Day                            
 Henry Hub NG-W-HH-SNL                         9.18           9.38                               
 Transco Z6 New York NG-CG-NY-SNL              7.83           8.30                               
 PG&E Citygate NG-CG-PGE-SNL                   10.20          10.76                              
 Dominion South NG-PCN-APP-SNL                 7.72           7.97                               
 Chicago Citygate NG-CG-CH-SNL                 8.37           8.78                               
 Algonquin Citygate NG-CG-BS-SNL               7.98           8.35                               
 SoCal Citygate NG-SCL-CGT-SNL                 13.43          15.75                              
 Waha Hub NG-WAH-WTX-SNL                       8.17           8.45                               
 AECO NG-ASH-ALB-SNL                           1.63           3.33 SNL U.S. Power Next-Day Prices ($ per megawatt-hour)
 Hub                                          Current Day     Prior Day                            
 New England EL-PK-NPMS-SNL                    79.25          78.75                              
 PJM West EL-PK-PJMW-SNL                      114.75         114.75                              
 Ercot North EL-PK-ERTN-SNL                    82.50          9.75                               
 Mid C EL-PK-MIDC-SNL                         650.00        1,039.70                             
 Palo Verde EL-PK-PLVD-SNL                    850.00         208.50                              
 SP-15 EL-PK-SP15-SNL                         505.00         188.75                              
 
 (Reporting by Scott DiSavino; Editing by Mark Porter)

 

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https://oilprice.com/Latest-Energy-News/World-News/US-Natural-Gas-Futures-Shed-Over-5-On-Soaring-Output.html

U.S. Natural Gas Futures Shed Over 5% On Soaring Output

By Charles Kennedy - Sep 06, 2022, 12:45 PM CDT

U.S. natural gas futures shed around 5% on Tuesday, hitting a four-week low as soaring output coupled with lower demand forecasts drags prices down, despite the fact that inventories are 11% lower than their five-year norm. 

U.S. natural gas was down 5.2% at 1:10 p.m. EST, to $8.38.

Output is still holding strong after the latest report from the Energy Information Administration (EIA) for the week ending August 26, which showed a natural gas inventory build of 61 billion cubic feet. While that brings inventory to 2,640 Bcf, it is still 228 Bcf below levels at the same time last year–heading into the winter season. 

Also prompting the decline is the outage at the key Freeport LNG export plant on the Gulf coast. 

That outage means traders are calculating some 2 billion cubic feet of gas per day that is not being consumed by Freeport for export and is remaining on the domestic market.

Freeport–which accounts for some 20% of U.S. LNG export capacity–looks set to remain offline until sometime in the first half of November, at which point we could see only a partial startup, ramping up to full capacity by the end of that month. Freeport, however, has already pushed back a restart date several times since declaring force majeure–and then revoking it–in June.

On June 8, Freeport suffered an explosion, causing the plant to shut down for damage assessment and repairs. 

So far in September, even with the Freeport outage, Refinitiv data showed a rise in the average volume of natural gas being pumped into American LNG export plants to 11.2 Bcfd, up from the average of 11 Bcfd last month. 

Globally, natural gas prices continue to soar on the twin developments of supply disruptions and sanctions on Russia for its invasion of Ukraine. Prices continue on a fast upward trajectory in the aftermath of Russia’s cutoff of flows to Germany through Nord Stream 1 last week.  

By Charles Kennedy for Oilprice.com

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https://www.yahoo.com/news/epa-denies-cheniere-energy-request-222545452.html

EPA denies Cheniere Energy request for LNG pollution waiver

WASHINGTON (AP) — The Environmental Protection Agency on Tuesday denied a request by Cheniere Energy, a leading U.S. producer of liquefied natural gas, to exempt two Gulf Coast plants from a federal air pollution rule.

An EPA spokesman says the agency on Tuesday denied Cheniere’s request to waive a rule that limits emissions of cancer-causing formaldehyde released by gas-fired turbines. Dozens of turbine operators faced a Monday deadline to comply with the formaldehyde rule, which is being reinstated after an 18-year stay.

“Controlling emissions of formaldehyde is important to protect public health. Though EPA is denying Cheniere’s request for a special subcategory to comply with the turbines rule, the agency will continue to work with them and with other companies as needed to assure they meet Clean Air Act obligations,'' EPA spokesman Tim Carroll said in an e-mail Tuesday.

Cheniere, the largest LNG exporter in the U.S., had warned that new requirements on LNG plants in Texas and Louisiana could disrupt gas supplies to Europe, which has struggled with surging energy prices following Russia's invasion of Ukraine.

In a statement Tuesday, Cheniere said it strongly disagrees with EPA’s decision but will work with state and federal regulators to “develop solutions that ensure compliance'' with the hazardous-pollution rule.

“Our conviction remains that these emissions do not pose a risk to public health, our workforce or the environment,'' company spokesman Eben Burnham-Snyder said in an email. “Although this decision may result in unwarranted expenditures, we believe that the steps needed to come into full compliance will not result in a material financial or operational impact. and that we will be able to continue to reliably supply LNG to customers and countries around the world.”

Environmental activists said Cheniere was using the global gas shortage — and spiking prices in Europe — to try to avoid meeting EPA rules that many consider lax.

“Because it’s costly, Cheniere is asking for exemptions to EPA rules so they can continue to release cancer-causing pollutants into our communities — the same poor neighborhoods President (Joe) Biden has vowed to protect,” said James Hiatt of the Louisiana Bucket Brigade, an activist group that has worked with communities near oil refineries, chemical plants and other manufacturers to fight pollution.

Petrochemical plants, pipeline operators and other manufacturers will have to prove they’ve complied with EPA limits on formaldehyde under the National Emission Standards for Hazardous Air Pollutants, a 2004 rule that is being reinstated after an 18-year stay.

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China Is Aggressively Buying Up Cheap Russian LNG

By Irina Slav - Sep 08, 2022, 2:45 AM CDT

  • Russia is selling liquified natural gas from the Sakhalin-2 project at a 50% discount and the operating company, a new state-owned entity, is still making a profit.
  • In August, China's imports of Russian LNG rose to the highest level since at least 2019, with the country buying volumes that were previously going to Japan and South Korea.
  • China's imports of liquified natural gas from the United States have been on the decline as Europe has been paying a premium for those shipments. 

Russia is selling liquefied natural gas from the Sakhalin-2 project in the Far East to China at a 50-percent discount and still making a profit on it, Bloomberg has reported, citing unnamed traders.

“Russian supply is still making its way into the market, just with a reorganization of trade flows via market participants who don’t take issue with accepting Russian cargoes,” Saul Kavonic, an energy analyst at Credit Suisse, told Bloomberg.

The other two big buyers of Sakhalin-2 LNG, Japan, and South Korea, according to Bloomberg, stopped buying the commodity after Russia’s invasion of Ukraine. Japan, however, continues to receive Russian LNG from Sakhalin-2 under other contracts.

“It appears China is happy to take Russian LNG cargoes at discounts, swapping out alternative supply that can then be directed to Europe at higher prices.”

Despite the discount, LNG prices this year have soared so high that the operator of Sakhlin-2 is still making a profit. This operator, by the way, is a new state-owned entity that replaced the previous consortium.

The two Japanese partners in the original consortium were allowed to keep their stakes in the new entity as well. Shell abandoned its 27.5-percent stake in the project.

Bloomberg reports that data shows China’s imports of Russian liquefied natural gas rose to the highest since at least 2019 in August while shipments from the United States have been on the decline as they get diverted to Europe, which is ready to pay a premium for the supply.

Speaking of Europe, Poland this week suggested the European Union introduce a price cap on all gas imports, including LNG, as the costs of this alternative gas supply contribute to the energy price inflation cross the bloc.

For now, the European Commission, however, has only proposed a gas price cap on Russian imports following the same logic as the one employed by the G7 in imposing an oil price cap on Russian exports.

By Irina Slav for Oilprice.com

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https://oilprice.com/Energy/Energy-General/China-Is-Aggressively-Buying-Up-Cheap-Russian-LNG.html

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https://finance.yahoo.com/news/natural-gas-buyers-hoarding-fuel-060542098.html

Natural Gas Buyers Hoarding Fuel at Sea to Prepare for Winter

(Bloomberg) -- Energy traders and power utilities are storing more liquefied natural gas at sea, an unusual move to hoard supply for winter as the market faces a severe shortage.

Energy-starved utilities in Europe are parking LNG shipments off the coast in a scramble to replace Russian pipeline gas this winter. They can’t simply import the fuel into onshore storage because terminals are maxed out, and so are choosing to pay to keep the ship nearby.

Importers in Asia and South America have also jumped on the floating storage bandwagon, seeking extra supplies. At the same time, traders are looking to profit by storing LNG and cashing in when prices spike during the winter months.

LNG volumes in so-called floating storage globally hit 1.4 million tons on Sept. 2, the most in two years, according to energy intelligence firm Kpler. That’s nearly equal to Spain’s total imports in August.

The strategy, used frequently in the oil market, is rare for LNG because the liquid fuel slowly evaporates in the ships, making long periods of storage challenging. That illustrates the lengths that gas importers will go to in order to ensure they have enough fuel this winter.

There are at least nine vessels storing LNG in the ocean, according to Bloomberg and Kpler shipping data. The tanker British Partner was idling in the South China Sea this month after loading a cobbled-together cargo of Omani and Qatari gas via ship-to-ship transfer near Malaysia, Bloomberg data show. Meanwhile, the Aristidis I is waiting in the Caribbean with Dominican Republic-origin and US gas onboard, said Mathew Ang, an analyst at Kpler.

Natural gas prices in Europe and Asia are trading at a record high for this time of year as Russia curbs supply to key customers, intensifying competition for LNG shipments from suppliers like the US, Nigeria and Qatar.

The demand for ships globally is driving freight rates higher, and traders say they still have room to climb. In a sign of how short the market is, energy majors are refusing to release their vessels as they typically do at the end of summer.

“We would expect there to be more floating storage,” said Oystein Kalleklev, chief executive officer of shipowner Flex LNG Management AS. “However, the LNG gas carrier market is mostly sold out for the winter, so we would expect traders to utilize the ships in their existing portfolio.”

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New Gas Terminals Arrive to Ease Putin’s Grip on Europe

https://finance.yahoo.com/news/gas-terminals-arrive-ease-putin-072543235.html

(Bloomberg) -- Two floating liquefied natural gas terminals are setting up in a Dutch port, the first in a wave of the specialist tankers that Europe is banking on to ease the worst energy crunch in decades. [ARTICLE CONTINUES]

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At Least 10 EU Members Oppose A Price Cap On Russian Gas

By Tsvetana Paraskova - Sep 09, 2022, 6:00 AM CDT

At least 10 EU member states, including Italy, Greece, and Poland, are opposed to the bloc slapping a price cap on Russian gas over concerns that Putin might retaliate with a complete halt of gas supply to the whole of Europe, officials told the Financial Times on Friday as EU energy ministers prepare for today’s emergency meeting to discuss measures to ease the burden of the energy crisis on consumers.

Earlier this week, the European Commission said it would propose a mandatory target for the EU to cut power consumption at peak hours, a revenue cap on electricity producers and fossil fuel companies, and a price cap on Russian gas as immediate measures to save the European gas and electricity markets and help vulnerable consumers.

“We will propose a cap on Russian gas. The objective here is very clear. We must cut Russia's revenues which Putin uses to finance this atrocious war against Ukraine,” European Commission President Ursula von der Leyen said on Wednesday. 

Commenting for the Financial Times on the plan to cap the price of Russian gas, Nikos Tsafos, chief energy adviser to Greek Prime Minister Kyriakos Mitsotakis, said: “Quite frankly the Russians will probably retaliate on this.”

Italy, for its part, prefers a general cap on all the gas, its energy transition minister Roberto Cingolani told FT.

According to the Italian daily La Stampa, the Netherlands and the eastern EU member states are opposed to von der Leyen’s proposal to impose a price cap on Russian gas. Germany, Europe’s biggest economy and the most affected EU member by the now-shut Nord Stream pipeline isn’t supportive of the plan, either, La Stampa notes.

On Wednesday, Vladimir Putin threatened Europe that Russia would stop supplying all energy products to Europe if the EU and its Western allies impose price caps on Russian oil and natural gas.

By Tsvetana Paraskova for Oilprice.com

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LNG Could Be "Really, Really Tight" This Winter: Cheniere

By Julianne Geiger - Sep 08, 2022, 4:00 PM CDT

Limited global LNG supplies could be "really, really tight this winter, Cheniere Energy's executive vice president for worldwide trading told Reuters on Thursday.

Cheniere, the largest LNG exporter in the United States, believes that current prices indicate that LNG will continue to make its way to Europe, which has purchased 70% of Cheniere's total production so far this year—and none too cheaply.

"At the current pricing, the market says that this should continue to go to Europe," Corey Grindal said in an interview at the Gastech conference on Thursday.

The United States has increased its LNG exports to Europe as the later continues to grapple with natural gas supply concerns after Russia cut the flow of gas via its Nord Stream pipeline—and delayed the planned Nord Stream 1 restart.

LNG prices hit record highs last month as Russia restricted the flow of natural gas into Europe, causing a divergence between the spot price of LNG and the cost of LNG priced against oil—and those countries that rely on the spot market are finding themselves unable to pay those prices.

Cheniere has already sold about 90% of its LNG production this year via long-term contracts.

"At the end of the day, what's going to decide how tight the market will be is how cold it is and how government policies, industry rationing work. ..There is still a lot of game to play," Grindal said. And this winter's weather in Europe's LNG-buying rival, China, could determine how tight the global market will be—and incidentally, how much LNG is left for Europe to snag.

China has already secured multiple long-term LNG deals with Cheniere—the most recent a deal between Cheniere and PetroChina to supply 1.8 mtpa that runs all the way into 2050—the longest supply deal Cheniere has struck yet.

By Julianne Geiger for Oilprice.com

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https://oilprice.com/Latest-Energy-News/World-News/LNG-Could-Be-Really-Really-Tight-This-Winter-Cheniere.html

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https://oilprice.com/Energy/Gas-Prices/Record-US-LNG-Exports-To-Europe-May-Not-Last.html

Record U.S. LNG Exports To Europe May Not Last

By Irina Slav - Sep 11, 2022, 2:00 PM CDT

  • U.S. LNG exports to Europe increased substantially since the beginning of the year.
  • The EU’s gas storage refill bill amounts to 10 times its usual.
  • LNG exports have already resulted in substantially increased inflation via higher natural gas and electric power prices.

The United States and its natural gas have been vital for Europe’s attempt to fill its gas storage ahead of this winter season. Yet record U.S. LNG exports have led to a surge in domestic gas prices. The boomerang is coming back. When President Joe Biden promised the European Union there would be enough natural gas for its winter, EU politicians rejoiced and doubled down on Russian sanctions. A few months later, EU gas storage is full ahead of schedule.

Meanwhile, however, LNG prices have soared like an eagle, China is re-selling Russian LNG to Europe, and gas prices in the U.S. are three times higher now than they were a decade ago and up 95 percent on the futures market for November 2022 to March 2023. And most analysts in Europe are talking about a recession.

That U.S. LNG was not going to be enough was clear from the beginning. As energy analyst David Blackmon, for example, has repeatedly warned since March, there is plenty of natural gas in the ground in the U.S., but far from all of it is being extracted. There are, in other words, purely physical constraints to U.S. gas exports to Europe.

Then there is the price issue. Right now, U.S. LNG is competitive because of the insane curve the European gas futures market has been following as Gazprom squeezed Nord Stream 1 shipments in response to sanctions. But this does not mean U.S. LNG is cheap. In fact, it is not cheap at all, which is what swelled the EU’s gas storage refill bill to 10 times its usual.

Now, there is another price issue in the home of U.S. LNG. This is a problem that there were also warnings about earlier this year. In fact, earlier this year, investment firm Goehring & Rozencwajg forecast that U.S. natural gas prices were about to take off after European ones before too long.

Related: Oil Prices Rise Despite Economic Concerns

The reasons for the surge were overall tight gas supply and U.S. producers’ new central role as biggest suppliers to Europe. Also, Goehring & Rozencwajg predicted U.S. gas production was nearing a plateau.

Right now, gas production is on a strong rise, so prices fell this week but remain much higher than they had been for the last couple of decades, prompting the beginning of what could become a major backlash against stronger LNG exports.

“We appreciate that the [Joe] Biden administration has been working with European allies to expand fuel exports to Europe. A similar effort should be made for New England,” a group of governors from New England wrote in a letter to Energy Secretary Jennifer Granholm this summer, per a Financial Times report.

They went on to ask Washington to help their states—Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, and Vermont—secure enough liquefied natural gas for the winter. What this means is that the governors asked Washington to reduce exports and redirect some LNG to local consumers.

Granholm’s answer to the governor, per the FT, was to say that the administration was “prepared to use all the tools in our toolkit” to help, but she also added there were not going to be any “blanket waivers” from the Jones Act that effectively restricts transport between U.S. ports to only vessels that are U.S.-built, U.S.-flagged, and U.S-crewed. In other words, no foreign-flagged vessel could load LNG in Texas and ship it to Maine, which limits New England’s options.

This letter by the New England governors may be a sign of more trouble to come Washington’s way because of its ambition to help energy-starved Europe. Of course, this trouble would be nowhere near the proportions of the European disaster, thanks to the fact that the U.S. produces all the natural gas it consumes. Yet higher prices are not something consumers or businesses welcome, especially in the middle of a war on inflation.

“LNG exports have already resulted in substantially increased inflation via higher natural gas and electric power prices,” wrote the Industrial Energy Consumers of America group in a regulatory filing cited by the FT.

How bad high electricity prices are for business profitability and consumer spending can be clearly seen from a glimpse at Europe right now. Just because it can’t get this bad in the United States, after all, does not mean that it can’t get bad enough for Washington to start worrying.

For now, there are no indications that the administration is prepared to pressure LNG exporters into keeping more of their gas at home, not least because exports are already constrained by the Freeport LNG outage. But pressure from consumer organizations might increase as the northern hemisphere moves closer to winter and energy consumption climbs higher.

Price pressure on consumers is also playing its role: a lot of Americans are saying that while they are happy to help Ukraine and the Europeans in their time of hardship, they are not prepared to foot the bill for that hardship. One can’t really argue with that, especially if one wants to keep control—thin as it is—of Congress for the next two years.

By Irina Slav for Oilprice.com

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https://www.fxempire.com/forecasts/article/natural-gas-price-fundamental-daily-forecast-bears-defending-8-00-with-7-669-7-121-next-objective-1121945

By:
Updated: Sep 12, 2022,
Natural Gas Price Fundamental Daily Forecast – Bears Defending $8.00 with $7.669 – $7.121 Next Objective
NOAA released an updated outlook that predicted a 91% chance the current La Nina pattern would influence weather conditions through the fall.

Natural gas futures are edging higher for a third straight session on Monday as prices continue to consolidate just above a key support area at $7.669 to $7.121. The market is being underpinned by forecasts calling for warmer weather and higher demand in mid-to-late September.

At 11:25 GMT, October natural gas futures are trading $8.076, up $0.080 or +1.00%. On Friday, the United States Natural Gas Fund ETF (UNG) settled at $27.87, up $0.34 or +1.24%.

Refinitiv Supply/Demand Outlook

Data provider Refinitiv said average gas output in the U.S. Lower 48 states rose to 99.1 bcfd so far in September from a record 98.0 bcfd in August

Refinitiv projected average U.S. gas demand, including exports, would drop from 97.4 bcfd this week to 92.9 bcfd next week as the weather cools before rising to 93.3 bcfd in two weeks as the weather warms again.

US Liquefied Natural Gas Update

The average amount of gas flowing to U.S. LNG export plants rose to 11.1 bcfd so far in September from 11.0 bcfd in August. That compares with a monthly record of 12.9 bcfd in March. The seven big U.S. export plants can turn about 13.8 bcfd of gas into LNG.

The reduction in exports from Freeport is a problem for Europe, where most U.S. LNG has gone this year as countries there wean themselves off Russian energy.

Freeport, the second-biggest U.S. LNG export plant, was consuming about 2 bcfd of gas before it shut on June 8. Freeport LNG expects the facility to return to at least partial service in early to mid-November.

NOAA Updates Chances of La Nina Fall and Winter

Natural Gas Intelligence (NGI) reported that the National Oceanic and Atmospheric Administration (NOAA) released an updated outlook Thursday that predicted a 91% chance the current La Nina pattern would influence weather conditions through the fall and a 54% chance through the coming winter. NOAA cited cooler-than-average water in the east-central Pacific and long-range climate models.

NGI added, “If a La Nina winter develops, it would mark the third straight year. During such winters, the southern half of the country tends to be warmer, while the northern half is often colder than normal. That would bode well for natural gas consumption in markets throughout the Upper Midwest and Northeast.”

“La Nina patterns also often worsen droughts in California and the Southwest. This would diminish hydropower and, potentially, increase calls for natural gas in those region,” according to NGI.

Daily-October-Natural-Gas-2.jpg?func=cov

 

Daily Forecast

The consolidation suggests investor indecision and impending volatility.

On the upside, the nearest objective is a minor pivot at $8.573, followed by a short-term retracement zone is $8.869 to $9.133.

On the downside, the major support zone is $7.669 to $7.121. This zone has to hold or prices could begin to accelerate to the downside with $5.350 the next major target.

The price action suggests rising output is capping gains, while a sliver of hope for steady demand into the end of the month is providing support.

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

 
 
 

 

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https://oilprice.com/Latest-Energy-News/World-News/US-Natural-Gas-Prices-Plummet-On-Rail-Deal-Storage-Build.html

U.S. Natural Gas Prices Plummet On Rail Deal, Storage Build

By Julianne Geiger - Sep 15, 2022, 12:00 PM CDT

U.S. natural gas futures fell 8% on Thursday as the rail union reached a temporary labor agreement with its workers.

Henry Hub natural gas futures (NGV2) fell $0.728 MBtu (-7.99%) to $8.397 on the railway deal, without which would have increased the demand for natural gas in an already tight market. A rail industry disruption would have disrupted the flow of coal.

A larger than anticipated storage build for natural gas also weighed on prices, which were trading near record highs due to the tight market.

 

On Thursday, the Energy Information Administration’s (EIA) Weekly Natural Gas Storage Report showed that total working gas in underground storage in the Lower 48 rose to 2,771 Bcf for the week ending September 9, up from 2,694 Bcf in the week prior. While this is up from the week and a bearish signal for prices, working gas in storage is still down  7.4% from this time last year, and 11.3% lower than the five-year average of 3,125 Bcf. 

1663261292-o_1gd11ianfbi510phaam11tnuh18

The largest gain in terms of working gas in underground storage was seen in the Midwest, followed closely by the East. Working gas in the Pacific region fell for week ending September 9.

The build in inventories and subsequent drop in prices could help alleviate some of the price pressures currently plaguing US nat gas buyers.

The storage build was above analyst expectations.

The rail deal and storage build combo was enough to send prices substantially lower, and fell in lockstep with falling crude oil prices as well.

By Julianne Geiger for Oilprice.com

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(edited)

https://www.fxempire.com/forecasts/article/natural-gas-price-fundamental-daily-forecast-bears-expecting-oversized-storage-injection-this-week-1129196

Natural Gas Price Fundamental Daily Forecast – Bears Expecting Oversized Storage Injection This Week

Published: Sep 19, 2022, 07:23 CDT
 
This week’s EIA storage report showed injections with a mean increase of 83 Bcf, or slightly better than the five-year-average of 81 Bcf.

U.S. natural gas futures are trading lower on Monday, pressured by record production and short-term forecasts calling for lessening demand. The domestic markets are also being pressured by an extended fall in Dutch gas prices from the previous week as European gas storage continued to fill with Norwegian gas flows set to pick up.

At 11:36 GMT, November natural gas futures are trading $7.469, down $0.342 or -4.38%. On Friday, the United States Natural Gas Fund ETF (UNG) settled at $26.94, down $1.72 or -6.00%.

Friday Recap

November natural gas dropped 6.70% to its lowest level since July 20 with output holding near a monthly record as global gas prices slumped. Data provider Refinitiv said average gas output in the U.S. Lower 48 states rose to 99.0 bcfd so far in September from a record 98.0 bcfd in August.

Demand was expected to fall also with the coming of cooler autumn weather and the shutdown of another liquefied natural gas (LNG) facility.

Refinitiv projected average U.S. gas demand, including exports, would slip from 93.1 bcfd this week to 92.5 bcfd for the next two weeks. Meanwhile, demand is expected to decline further when the Cove Point LNG plant in Maryland shuts for a couple weeks of maintenance in October. This is on top of the existing shutdown at the second-biggest U.S. LNG export plant at Freeport LNG.

Traders Continue to Digest Bearish Storage News

The U.S. Energy Information Administration reported last Thursday that domestic natural-gas supplies rose by 77 billion cubic feet for the week-ended September 9. That compared with the average analyst forecast for an increase of 69 billion cubic feet, based on a survey conducted by S&P Global Commodity Insights.

Total working gas stocks in storage stand at 2.771 trillion cubic feet, down 223 billion cubic feet from a year ago and 354 billion cubic feet below the five-year average, the government said.

The report indicated the trajectory of supply starting to outstrip demand. Adjusting for weather, the market was 1.4 Bcf/d oversupplied during the latest EIA report period, versus a 0.4 Bcf/d undersupply in the prior week, according to Tudor, Pickering, Holt & Co. (TPH) estimates.

Recent data shows production growth outpacing TPH modeling, driven by higher volumes from the Haynesville Shale, the Eagle Ford Shale and the Anadarko, Natural Gas Intelligence (NGI) noted.

Short-Term Outlook

We’re looking for the downside bias to continue due to the combination of approaching cooler weather, higher production and more natural gas to consume domestically amid export outages that could lead to oversized storage injections in coming weeks.

NGI reported on Friday that an early look at this week’s EIA storage report, covering the Sept. 16 week, showed injections of 73 Bcf to 102 Bcf, with a mean increase of 83 Bcf, or slightly better than the five-year-average of 81 Bcf. This was based on a Reuters survey.

For a look at all of today’s economic events, check out our economic calendar.
Edited by Tom Nolan

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US natural gas futures extended their decline to $7.5/MMBtu, the lowest in nearly two months, in line with the European benchmark and as US railroads and labor unions reached an agreement to avert a rail shutdown that would hit energy supplies across the country. The previous threat of a rail strike sent natural gas prices close to the 14-year high of $10/MMBtu hit in August, as a rail strike would halt coal deliveries and ramp up coal-to-gas switching activity. Elsewhere, data from the EIA pointed to 77 billion cubic feet of gas being added to storage by utilities in the week that ended September 9th, above estimates of 73 billion. On top of that, domestic supply is set to rise as the Cove Point LNG plant in Maryland is set to shut down for maintenance in October, disabling exports abroad and increasing stockpiles for domestic utilities. The event adds to the sharp delay in the restart of Freeport LNG’s Quintana export plant to November.

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

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Front-month Dutch gas futures fell towards €170 per megawatt hour, the lowest level since July 25th and following a 9% drop in the previous week as Europe intensified efforts to ease reliance on Russian imports including price caps and bailing out local energy companies. Measures proposed by the European Commission include raising €140 billion from energy companies’ profits and a mandatory cut on energy use, and energy ministers will meet on September 30th to try to approve them. Also, Germany is on track to control the local unit of Russian oil major Rosneft, Uniper and two more major gas importers, in an attempt to prevent shortages and blackouts. France is planning to cap energy-price hikes for households at 15% starting in 2023 and UK is working on a support package aiming to halve energy rates for businesses. Meanwhile, European inventories are almost 86% full, slightly above the 5-year average, with 90% in Germany, according to Gas Infrastructure Europe. .

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

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NGAS Head and Shoulders Pattern Indicates Reversal

The NGAS 4 hour chart is showing a reversal chart pattern:

  1. The NGAS chart offers a classical head and shoulders reversal chart pattern (orange boxes).
  2. The bullish push up within wave B/2 stopped at the 61.8% Fibonacci level.
  3. The bearish decline after the bearish bounce has been very strong and is likely some type of wave 3 (yellow).
  4. A mild retracement within the wave 4 (yellow) could take price eventually back to the 23.6% or 38.2% Fibonacci levels.
  5. A deeper bullish retracement invalidates the wave 4 (yellow) pattern.
  6. A bearish continuation aims for the Fibonacci targets down below.
  7. If price action only reaches the -27.2% Fibonacci target, then it’s most likely a wave C ([pink). If price action goes to the -61.8% Fib, then it could be either a wave 3 or C.
  8. A break below the -61.8% Fibonacci level indicates a wave 3 (pink).

19.09.2022_GAS.png?func=cover&q=70&width

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https://www.zerohedge.com/energy/us-gas-producers-struggle-meet-demand-kemp

US Gas Producers Struggle To Meet Demand: Kemp

Tyler Durden's Photo
by Tyler Durden
Monday, Sep 19, 2022 - 01:05 PM

By John Kemp, senior market analyst at Reuters,

U.S. shale drillers are struggling to meet strong demand for gas from domestic generators as well as customers in Europe and Asia scrambling for replacement supplies following Russia’s invasion of Ukraine.

Working inventories in underground storage amounted to 2,771 billion cubic feet on Sept. 9, the second-lowest for the time of year since 2010, according to data from U.S. Energy Information Administration (EIA).

unnamed%20%2824%29_5.png?itok=Icj5Pf7-

Storage has been below the pre-pandemic five-year average continuously since late January and the deficit has shown no sign of closing despite prices well above long-term averages.

unnamed%20%2823%29_6.png?itok=omLio8_I

Inventories are currently 398 billion cubic feet below the pre-pandemic average, compared with a deficit of 316 bcf at the start of the injection season on April 1 (“Weekly natural gas storage report”, EIA, Sept. 15).

unnamed%20%2825%29_4.png?itok=o_u52wD3

Electricity generation is on track for a record this year as a result of the economy's recovery from the pandemic and slightly above-average temperatures this summer.

unnamed%20%2826%29_4.png?itok=bWM57_0b

U.S. generators are burning record volumes of gas because coal-fired units have been retired and drought has limited hydroelectric output in the western states.

Generators consumed 4,372 bcf in the first five months of 2022, the second-highest on record after January-May 2020 (“Monthly energy review”, EIA, Aug. 25).

unnamed%20%2827%29_3.png?itok=awc8x8dk

Power producers’ gas combustion has been even stronger over the summer months, setting a new daily record in July (“Daily U.S. electricity generation from natural gas hit a record in mid-July”, EIA, Aug. 23).

At the same time, exports are running at record rates as new LNG liquefaction terminals meet soaring demand from importers in Europe and Asia.

APPROACHING WINTER

Persistent scarcity has forced front-month futures prices up to more than $8 per million British thermal units, more than double the seasonal average for 2011-2020...

unnamed%20%2830%29_1.png?itok=N27g-fx7

...and the highest after adjusting for inflation since 2008.

unnamed%20%2828%29_2.png?itok=siBW-PAH

In real terms, prices have been trading for most of the time since late May in the 80-85th percentiles for all months since 1990, signalling a shortage of stocks and providing a strong incentive for more production.

unnamed%20%2829%29_2.png?itok=3YLS7N6J

The one-year calendar spread has been trading in an extreme backwardation of $2.50-$4.00 per million Btus...

unnamed%20%2831%29_1.png?itok=MgYndL8g

...(99th-100th percentiles for all trading days since 2007) underscoring the shortage of inventories.

unnamed%20%2832%29_0.png?itok=1Z8qkhkK

The number of rigs drilling for gas has risen to 166, from 106 at the start of the year and a low of just 68 during the pandemic’s first wave in 2020.

unnamed%20%2833%29_0.png?itok=TCYNVktv

Oil rigs (likely to produce some associated gas) have climbed to 591, from a pandemic low of 172, according to field services company Baker Hughes.

As a result, gas production was up by around 4% in the second quarter of 2022 compared with the same period in 2021 but it was not enough to meet strong domestic and foreign demand and rebuild depleted inventories.

unnamed%20%2834%29_1.png?itok=J_i_FtA7

As a result, stocks are vulnerable in the event of a late-season hurricane in the Gulf of Mexico, a colder than normal winter, or an ice storm in the key producing areas of Texas.

In the last 10 years, the average winter drawdown has been around 2,182 bcf with a range from 1,541 to 3,010 bcf, compared with stocks of just 2,771 at present, with roughly two months’ more injections to go.

unnamed%20%2835%29_1.png?itok=Mk9w8GB0

unnamed%20%2836%29_0.png?itok=3tgB-dM8

Even so, hedge funds and other money managers have become progressively less bullish and even slightly bearish on gas prices since April.

unnamed%20%2837%29_2.png?itok=FFEqzHmW

The combined position in the two major contracts on NYMEX and ICE is equivalent to a net short position of 435 billion cubic feet, a major reversal from a net long of 1,394 bcf in early April.

unnamed%20%2838%29_1.png?itok=_TY-8xfJ

With prices already well above the long-term average, many portfolio managers are betting there is scope for them to retreat if winter temperatures are close to normal and there are no major output disruptions.

But the low level of inventories means there are few shock absorbers; the system will quickly come under pressure if this winter’s drawdown is towards the top end of the historic range or exceeds it.

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https://oilprice.com/Energy/Energy-General/A-Natural-Gas-Shortage-Is-Looming-For-The-US.html

A Natural Gas Shortage Is Looming For The U.S.

By Irina Slav - Sep 19, 2022, 7:00 PM CDT

  • As natural gas demand around the world breaks new records, U.S. shale producers are struggling to keep up with demand.
  • While natural gas prices in the United States fell after a railway strike was averted last week, it looks likely that prices both at home and abroad will spike this winter.
  • A hotter-than-expected summer and a lack of alternative energy sources have left U.S. inventories below the seasonal average.

Last week, the media rushed to report that natural gas prices in the United States had fallen sharply after trade unions and railway companies reached a tentative deal that averted a potentially devastating strike.

Indeed, natural gas prices fell by nearly a dollar per million British thermal units, helped by a respectable build in inventories. And yet, inventories remain below the seasonal average, exports are running at record rates, and producers are beginning to struggle to meet demand, both at home and abroad.

Reuters’ John Kemp wrote in a recent column that domestic and international gas consumption had risen to record highs, and shale producers—the ones that account for the bulk of U.S. natural gas output—were having a hard time catching up with this demand.

Meanwhile, although higher on a weekly basis, inventories remained at the second-lowest for this time of the year for the last 12 years, Reuters’ market analyst noted. He also added there were no signs of any improvement in the level of inventories despite the rise in prices.

None of this suggests lower prices for natural gas are coming to either the United States or international markets as the northern hemisphere heads into winter. On the contrary, the latest figures suggest more financial pain for gas consumers. And they confirm, to an extent, forecasts made earlier this year.

In the spring, the principals of investment firm Goehring & Rozencwajg said U.S. gas prices will converge with international prices towards the end of 2022. They noted something few other analysts tend to mention: the concentration of much of U.S. gas production in a handful of fields, with just two—Marcellus and Haynesville—accounting for as much as 40 percent of the total.

The Permian contributes another 12 percent of the U.S. total gas output, and the rig count in the Permian has been down for two weeks in a row, according to the latest data. Less drilling means less associated gas to add to the national total.

Meanwhile, on the demand side, electricity generation in the United States is seen reaching a record high this year, Kemp noted in his column, driven by the post-pandemic economic rebound. A hotter summer also contributed. A cold winter would certainly push gas consumption even higher.

Another contributor is the lack of alternative sources of electricity generation: coal plants are being retired, and droughts in many parts of the country have compromised its hydropower capacity, the Reuters analyst also noted.

While this is happening at home, demand for gas continues strong across the globe, too, as everyone seeks to stock up on fuel for the winter. U.S. energy companies are exporting liquefied natural gas at record rates. And disgruntlement at home is beginning to rear its head.

“We appreciate that the [Joe] Biden administration has been working with European allies to expand fuel exports to Europe. A similar effort should be made for New England,” a group of governors from New England wrote in a letter to Energy Secretary Jennifer Granholm this summer, per a Financial Times report.

The governors then went on to call on the administration to make sure there was enough LNG for American consumers, essentially asking politicians to reduce LNG exports. This does not bode well for balance in the U.S. gas market.

In May, John Kilduff from Again Capital told CNBC he expected gas prices to top $10 per mmBtu and maybe reach $12 to $14. “This is a commodity that trades parabolically a lot. It’s no stranger to parabolic moves up and down. It’s incredibly volatile, and it also has the ability to reset. We could get to $10 or $12 and if you have a cool August, then you could be down below $8 again,” he said at the time.

The Energy Information Administration this month revised its gas price forecast for the full year upwards, seeing the commodity average $9 per mmBtu in the final quarter before falling to $6 per mmBtu in 2023. The decline would come as a result of rising local gas production, the EIA noted.

In the meantime, however, until this increase in production materializes to a degree that begins to affect prices, there seems to be only one way they will be going: up. With heating season around the corner in both Europe and the United States and with a lot of people in both places using gas for heating, the price outlook for gas does not look good from a consumer’s perspective. It does look good from a gas exporter’s perspective, however.

It is unlikely that U.S. gas prices will climb anywhere near European levels, but they are up by a whopping 300 percent from a few years ago when gas was cheap because it was abundant. That sort of price increase affects everything along the supply chain that involves electricity produced using gas, sending ripples across the economy. And the more gas utilities use for lack of reliable alternatives, the longer the energy-driven inflation will continue.

By Irina Slav for Oilprice.com

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https://oilprice.com/Energy/Energy-General/Europes-Scramble-For-Oil-And-Gas-Is-Causing-A-Tanker-Shortage.html

Europe’s Scramble For Oil And Gas Is Causing A Tanker Shortage

By Irina Slav - Sep 20, 2022, 2:21 AM CDT

  • Europe is attempting to buy as much oil and gas as it can ahead of winter, which has resulted in tankers having to travel further distances and make few voyages.
  • The LNG carrier shortage is particularly acute as much of the fleet has already been booked for winter when demand is expected to climb, especially when Freeport LNG restarts.
  • At the same time, traders are putting an increasing amount of crude and fuel in floating storage, which is making the tanker market even tighter.

As Europe looks for oil, gas, and fuels from anywhere but Russia, a shortage is developing on the tanker market, Bloomberg has reported, as vessels carrying fossil fuels for Europe have to travel longer distances and fewer voyages.

As a result, freight costs are elevated, too, with the cost of sending a tanker of U.S. liquefied natural gas to China at the highest level since 2020, the report notes.

The LNG market is suffering the most, according to industry executives, because the fleet of LNG carriers is already quite limited. Also, these vessels have already been booked for the winter as shippers anticipate a spike in demand for LNG during peak demand season. They are also preparing for the restart of Freeport LNG, scheduled for November.

On top of all this, traders are putting more crude and fuels in floating storage, Bloomberg also noted. This is contributing to a tight tanker market, about to get tighter as demand for fossil fuel-carrying vessels rises.

Earlier this month, in another report, Bloomberg noted traders were in a rush to secure as many ice-class tankers as they could in anticipation of the EU embargo on Russian crude. The embargo will see Russian crude heading in non-European directions and a lot of it would likely use the Northern Sea Route.

In addition to this, tanker building has slowed down in the past few years, further contributing to the tightness of the market at a time of a looming demand spike. This suggests a strong further upward potential for tanker freight prices, adding to energy costs for importers.

According to traders, cited by Bloomberg, Asian economies are especially vulnerable to the adverse effects of the situation if they want to import oil and gas from the U.S. at a short notice since this might be not possible once heating season kicks in.

By Irina Slav for Oilprice.com

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https://oilprice.com/Latest-Energy-News/World-News/Oil-And-Gas-Permitting-In-The-US-Slow-Down.html

Oil And Gas Permitting In The U.S. Slows Down

By Charles Kennedy - Sep 20, 2022, 12:37 AM CDT

Oil and gas permitting in the United States slowed down last month, with the decline particularly marked in the Permian.

This is according to data from Evercore ISI, cited by Natural Gas Intelligence, which also showed that despite the slowdown in permitting activity, it remained stronger than it was a year ago.

In absolute numbers, oil and gas permits issued in the Lower 48 last month were 3,106 fewer than those issued in July. Yet the August total was 27 percent higher than the number of permits issued in August 2021 and 178 percent higher than the number of permits issued in August 2020, the investment bank’s data also showed.

The decline in permitting was not distributed evenly across oil and gas regions, either. According to Evercore ISI, the Powder River Basin spanning Montana and Wyoming saw the biggest increase in permit issuance, at 134 permits. On the other hand, the Haynesville shale saw a drop in permits, to the tune of 173 permits.

“Permits in the Permian represented 37% of the total count, down from 40% in July,” the bank’s analysts noted. “The Eagle Ford was the basin with the second largest count share with 13%, followed by the Powder River Basin and other smaller plays with 10% each.”

The Permian has seen some declines in drilling activity recently but last week things picked up, with three new rigs added to the active count of the shale play. For the whole of Texas, however, Evercore ISI noted a decline in drilling permit issuance, as it did for New Mexico. The two states share the Permian.

Crude oil production in the United States currently stands at 12.1 million bpd, unchanged for the last three weeks, according to the latest weekly EIA estimates. U.S. production levels are up 400,000 bpd on the year, and up 2 million bpd versus a year ago.

By Charles Kennedy for Oilprice.com

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