Natural Gas Neutral/Bullish | Crude Oil Neutral | Economy Bearish | Weather Bullish |
Weekly Natural Gas Report
The Energy Information Administration (EIA) reported an injection of 64 Bcf into underground storage for the week ending November 11. Inventories are 3,644 Bcf, which is 1% less than the same period last year and 1% lower than the 5-year average. For the week ending November 8, Baker Hughes reported 155 gas-directed rigs, flat from last week. Oil-directed rigs were at 622, up (9) for the same period.
Weekly Power Report
Forward prices were up in all regions week over week. ISONE and NYISO saw double-digit percentage increases of 16.4% and 16% respectively. PJM prices increased between 8.3%-9.4% and MISO prices were up 7.7%-7.8%.
Why Buy Now?
Having trouble closing deals due to high rates? We're here to provide you with the information you need to answer the recurring question; Why buy now?
We break down the answer to this question so you can come to the table with all the information you need to help your customer navigate these unprecedented market conditions.
Natural Gas Storage is Near Record Lows
Remembering all the way back to Economics 101, we know the first items of interest in making sense of any price are supply and demand. How much gas we have stored nationally is one of the most influential factors to the supply side of the equation.
With the delay in reopening of a major LNG export terminal and near a near perfect fall weather scenario, natural gas storage levels have gone from historically low levels to just below average levels. Hidden in the numbers is with normal weather and LNG exports the U.S. would have finished at record low levels of storage.
Since natural gas is used as the primary generation source for power, the risk of future low levels of storage will likely translate to natural gas and power prices continuing with the recent historical high volatility.
Natural Gas Exports are Soaring
With the loss of a major pipeline between Russia and Europe, European countries are forced to source gas elsewhere, and places the United States as the top new supplier. This provides U.S. producers with the opportunity to sell LNG gas overseas at 6X domestic prices (conservatively). In this situation, coupled with low storage levels, domestic natural gas prices would increase exponentially.
Without Russian Gas - Prices Could Explode
Now we turn our focus to examine demand through a global lens. Russia’s invasion of Ukraine highlights just how influential Russia is to the global energy economy. Russia is the second-largest producer of natural gas globally, and accounts for 40% of Europe’s natural gas supply.
As of this writing, several European countries have stopped importing natural gas from Russia, but others are unable to do so without suffering catastrophic consequences themselves.
Which European Countries Depend on Russia Gas?
The chart below shows the % of gas supply from Russia in selected EU countries (2020)
Should Russia stop all exports, European countries would be forced to source gas elsewhere, and and would place the United States as the top new supplier. This would provide U.S. producers with the opportunity to sell their gas overseas at 10X domestic prices (conservatively). In that scenario, coupled with low storage levels, domestic natural gas prices would increase exponentially.
In Summary
While we may see some brief dips, there is a very real risk that prices continue to move higher this fall/winter due to supply constraints, and demand, both domestic and global. It is in every customer’s best interest to protect themselves by fixing all, or part, of their energy supply costs.