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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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The Pullback In Natural Gas Has Created An Opportunity

By Alex Kimani - Sep 21, 2022, 7:00 PM CDT

  • Natural gas has retreated from recent highs as European countries are reaching storage capacity levels.
  • U.S. natural gas prices have hit a fresh six-week low, closing at $7.75/MMBtu on Monday.
  • The current pullback in natural gas is seen as ‘cyclical’, but the energy commodity still enjoys structural tailwinds.


U.S. natural gas prices have hit a fresh six-week low, closing at $7.75/MMBtu on Monday with the Wall Street Journal saying that the market has lost momentum due to U.S. production topping 100 Bcf/day for the first time ever. The odds are now that ample U.S. production will be enough to meet local demand in the final months before winter arrives. Prices are likely to remain depressed unless there’s a breakout of storm activity in the Gulf of Mexico which could disrupt production.

  Meanwhile, benchmark European gas prices have continued to fall, dropping nearly 9% on Monday to their lowest in two months thanks to  European energy markets improving due to a combination of successful policy action as well as a price-induced demand response. Indeed, Germany’s economic minister Robert Habeck has revealed that the country’s natural gas storage levels are nearing 90% thus giving it a chance of weathering the winter season. He has, however, warned that gas storage will likely be empty by the end of winter.

Naturally, natural gas and LNG stocks have lost some momentum alongside the commodity they track. For instance, the United States Natural Gas Fund, LP (NYSEARCA: LNG) is down 20.3% over the past 30 days but is still 108.9% up in the year-to-date. However, the structural tailwinds are likely to continue outweighing “cyclical headwinds” as Strategas Securities LLC partner and head of technical analysis Christopher Verrone told Bloomberg. Investors should, therefore, use the latest pullback in gas stocks as a buying opportunity. Here are some top picks.


  • Cheniere Energy


Market Cap: 42.1B

YTD Returns: 64.0%      

Cheniere Energy, Inc. (NYSE: LNG) is an energy infrastructure company that primarily engages in the liquefied natural gas (LNG) related businesses in the United States. Cheniere is one of the few pure-play LNG companies in the United States; the company owns and operates the Sabine Pass LNG terminal in Cameron Parish, Louisiana; and the Corpus Christi LNG terminal near Corpus Christi, Texas. The company also owns Creole Trail pipeline, a 94-mile pipeline interconnecting the Sabine Pass LNG terminal with various interstate pipelines; and operates Corpus Christi pipeline, a 21.5-mile natural gas supply pipeline that interconnects the Corpus Christi LNG terminal with various interstate and intrastate natural gas pipelines. 

Related: Private Equity Scoops Up Oil And Gas Assets

Back in March, the DoE approved expanded permits for Cheniere Energy's Sabine Pass terminal in Louisiana and its Corpus Christi plant in Texas. The approvals allow the terminals to export the equivalent of 0.72 billion cubic feet of LNG per day to any country with which the United States does not have a free trade agreement, including all of Europe. Cheniere says the facilities already are making more gas than is covered by previous export permits.


  •  EQT Corp.


 Market Cap: 13.6B

 YTD Returns: 78.0%     

EQT Corporation (NYSE: EQT) operates as a natural gas production company in the United States. The company produces natural gas, natural gas liquids (NGLs), including ethane, propane, isobutane, butane, and natural gasoline. 

As of December 31, 2021, EQT had 25.0 trillion cubic feet of proved natural gas, NGLs, and crude oil reserves across approximately 2.0 million gross acres, including 1.7 million gross acres in the Marcellus play. 

EQT Corp. has unveiled a plan centered on producing more liquified natural gas by dramatically increasing natural gas drilling in Appalachia and around the country's shale basins, as well as pipeline and export terminal capacity, which it said would not only boost United States energy security, but also help break the global reliance on coal and on countries like Russia and Iran.


  • Ovintiv 


Market Cap: $12.6B

YTD Returns: 40.0%

Ovintiv Inc.(NYSE: OVV) is a Denver, Colorado-based energy company that, together with its subsidiaries, engages in the exploration, development, production, and marketing of natural gas, oil, and natural gas liquids.

The company’s principal assets include Permian in west Texas and Anadarko in west-central Oklahoma; and Montney in northeast British Columbia and northwest Alberta. Its other upstream assets comprise Bakken in North Dakota, and Uinta in central Utah; and Horn River in northeast British Columbia, and Wheatland in southern Alberta. 

Back in June, Mizuho upgraded OVV to $78 from $54 (good for nearly 60% upside to current price), citing improving tailwinds.

#4. Devon Energy Corp

      Market Cap: $43.2B

      YTD Returns: 47.8% BofA Analyst Doug Leggate has advised investors to focus on oil companies with potential to grow their free cash flows through consolidations or other cost reduction measures, naming Devon Energy (NYSE: DVN), Pioneer Natural Resources (NYSE: PXD), and EOG Resources (NYSE: EOG). 

Devon fits that playbook to a tee, and while Leggate issued his advice earlier in the year, the case for this is only growing stronger. 

DVN stock has been one of the best-performing energy stocks thanks to strong earnings and continuing cost discipline including a variable dividend structure.

Related: UAE Oil Giant Reportedly In Talks to Acquire Gunvor Trading

Following the merger with WPX Energy last year, the company announced fixed-plus-variable dividends, something that has gone down well with Wall Street. In the second quarter, Devon paid out up to 50% of free cash as a variable dividend, bringing the total dividend to $1.55 per share. The stable portion has been indifferent, currently yielding slightly more than 1%. But if the latest convertible payout is a sign of the future, shareholders could receive closer to 10% overall.

Some Wall Street analysts had earlier pointed to the potential for DVN to sport a dividend yield of as high as 8% by year-end. Devon has already exceeded that, and now sports a juicy 9.7% estimated forward dividend yield.

#5. Chesapeake Energy Corp.

      Market Cap: $12.4B

      YTD Returns: 65.8%

Commodity price hedging is a popular trading strategy frequently used by oil and gas producers as well as heavy consumers of energy commodities such as airlines to protect themselves against market fluctuations. During times of falling crude prices, oil and gas producers normally use a short hedge to lock in oil prices if they believe prices are likely to go even lower in the future. 

Unfortunately, hedging also means that these companies are unable to enjoy the benefits of rising gas prices and can in fact lead to hedging losses. However, some bold producers betting on a commodity rally hedge only minimally or not at all.

Tudor Pickering rates Chesapeake Energy (NYSE: CHK) a Buy, saying the company remains one of the few producers that remain relatively unhedged.

This might come off as an odd pick given Chesapeake’s history, but somehow makes sense at this point.

Widely regarded as a fracking pioneer and the king of unconventional drilling, Chesapeake Energy has been in dire straits after taking on too much debt and expanding too aggressively. For years, Chesapeake borrowed heavily to finance an aggressive expansion of its shale projects. The company only managed to survive through rounds of asset sales (which management is averse to), debt restructuring and M&A but could not prevent the inevitable--Chesapeake filed for Chapter 11  in January 2020, becoming the largest U.S. oil and gas producer to seek bankruptcy protection in recent years.

Thankfully, Chesapeake successfully emerged from bankruptcy last year with the ongoing commodity rally offering the company a major lifeline.

The new Chesapeake Energy has a strong balance sheet with low leverage and a much more disciplined CAPEX strategy. 

The company is targeting <1x long-term leverage in a bid to preserve balance sheet strength, target production is 400+ thousand barrels / day and intends to limit CAPEX to $700-750 million of annual capital expenditures and positive FCF. CHK says it expects to generate >$2 billion of FCF over the next 5 years, enough to improve its financial position significantly. 

By Alex Kimani for

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THURSDAY morning 9/22/2022

Natural Gas Price Fundamental Daily Forecast – Triple-Digit EIA Build Could Sink Prices into $7.213

Updated: Sep 22, 2022, 07:28 CDT3min read
Ahead of today’s EIA weekly storage report for the week-ended September 16, traders are looking for a consensus injection in the 90s Bcf.

Natural gas futures are edging lower on Thursday shortly before the release of the government’s weekly storage report.

According to a Reuters poll, U.S. utilities likely added a higher-than-usual amount into storage. It is expected to exceed both the build during the same week a year ago and the five-year average.

Traders are saying the size of the expected build could help put a dent in the 1 year and five year storage deficit.

At 11:50 GMT, November natural gas futures are trading $7.723, down 0.104 or -1.33%. On Wednesday, the United States Natural Gas Fund ETF (UNG) settled at $26.97, up $0.30 or +1.13%.

Short-Term Weather Outlook

According to NatGasWeather for September 22-28, “California and much of the West remain comfortable with highs of 60s to 80s as a weather system brings showers.

Hot high pressure continues to rule Texas, the South & Southeast with highs of 90s, while nice elsewhere with highs of 60s to 80s.

Mild weather systems will track across the Great Lakes and Northeast late this week and early next week with highs of mid-50s to 70s, while Texas and the South cools into the 80s to low 90s.

Overall, moderate national demand the next 2-days, then low after.”

EIA Weekly Storage Report:  Large Build Expected

Ahead of today’s Energy Information Administration (EIA) weekly storage report for the week-ended September 16, due to be released at 14:30 GMT, Natural Gas Intelligence (NGI) is reporting a consensus injection in the 90s Bcf.

According to NGI, the results of a Reuters poll ranged from predicted increases of 86 Bcf to 99 Bcf, with a median of 93 Bcf. Additionally, a Bloomberg survey spanned estimates of 80 Bcf to 104 Bcf, landing at a median expectation of an injection of 95 Bcf.

The estimates compare with the year-earlier injection of 77 Bcf and a five-year average of 81 Bcf.

A reading of 93 Bcf, for example, would lift stockpiles to 2.864 Trillion Cubic Feet (Tcf), about 6.7% below the same week a year ago and 10.7% below the five-year average.

The experts at NatGasWeather wrote, “Volatility has been extreme the past few weeks and we expect this will continue, aided by today’s EIA storage report, where survey averages suggest a build of 92-96.5 Bcf, larger than the 5-year average of 81 Bcf.

It was warmer than normal over the western, northern, and far eastern US, while a touch cool over the South and east-central US.

We expect a build of 101 Bcf. What’s also expected to impact trade is where a strengthening tropical cyclone in the Caribbean tracks, especially since some of the weather data forecasts it to arrive into the Gulf of Mexico next week, then into the US Gulf Coast after."

Daily Forecast

The main trend on the daily chart is down based on the series of lower tops and lower bottoms. The main range is $5.465 to $10.040. The market is currently testing its 50% to 61.8% retracement zone at $7.753 to $7.213.

Trader reaction to $7.753 to $7.213 is likely to determine the short-term direction of the market.

Look for an upside bias to develop on a sustained move over $7.753 and for a downside bias to develop on a sustained move under $7.213.

As far as the EIA report is concerned, any triple digit read is likely to be bearish and could trigger an acceleration to the downside under $7.213.

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

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Thurs Sept 29 REUTERS - John Kemp

COLUMN-U.S. gas exports squeeze domestic supply: Kemp

By John Kemp

LONDON, Sept 29 (Reuters) - U.S. gas production will need to increase significantly to continue growing exports while ensuring fuel remains affordable for domestic power producers, households and industrial users.

Production of dry gas (stripped of natural gas liquids) totalled 17,329 billion cubic feet in the first six months of the year, according to data from the U.S. Energy Information Administration (EIA).

Dry gas output was up by 944 billion cubic feet compared with the same period in 2019, the last year before the pandemic ("Monthly energy review", EIA, Sept. 27).

Domestic consumption increased by 440 billion cubic feet, with electricity generators accounting for 382 billion.

But exports surged by 1,408 billion cubic feet largely as a result of the commissioning of large new liquefaction terminals.

The massive increase in LNG exports has significantly tightened the availability of gas for domestic users and put upward pressure on prices.

As a result, inventories depleted by 876 billion cubic feet in the first six months of 2022 compared with just 246 billion in the first six months of 2019.

The drawdown was the second-largest on record and 65% higher than the average over the previous 10 years.

Chartbook: U.S. gas production, consumption and exports


To maintain and grow exports U.S. gas producers will need to increase their output significantly in both the short and longer term.

The number of rigs employed drilling for gas has already increased to 160, up from 99 at the same point last year, but is only slightly higher than the 146 at this point in 2019, according to field services company Baker Hughes.

A significant share of natural gas output is associated gas produced as a by-product of crude oil production from crude oil wells.

The number of rigs drilling for oil has increased to 602, up from 421 last year, but still well below the 713 at the same point in 2019.

Raw rig counts can be a misleading indicator of production except in the very short term because of changes in drilling efficiency over time.

Current rigs are likely to produce more gas than a similar-sized fleet three years ago because technology has improved, enabling faster drilling, longer underground laterals and a tighter focus on the most gas-rich areas.

But the industry will likely need an even more rigs to meet the high demand for gas from domestic users and export markets in Europe and Asia.

Futures prices for gas delivered in January 2024 have retreated to $5.60 per million British thermal units from $6.50 at the start of September but still far above $3.65 this time last year and $2.90 in 2019.

The rise in gas prices will help reduce the shortage, but the more recent downturn in the price of oil is likely to prove unhelpful because it will tend to reduce oil-directed drilling and associated gas output.

The challenge for the industry is to overcome supply chain constraints and scale up output profitably in order to satisfy domestic demand as well as its ambition to remain the primary supplier of the world's fast-growing gas market.

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