Released September 21, 2023 | SUGAR LAND
en
Editorial by Geoffrey Lakings for Industrial Info Resources (Sugar Land, Texas)--September 2023: So when I last touched upon a pricing outlook for natural gas at HH, I was calling out the possibility of $5 by next May 2024. So, let's see how this outlook is shaping up a month later. For as we know, the price has rallied a few times to highs around $2.77.
FXEmpire: Commodities: Natural Gas
With today, it was seeing a marked fall-off of ~$.20, mostly because of bearish news entering this seasonal shoulder doldrums (Sep., Oct.) picture.
FXEmpire: Natural Gas Prices Forecast: Bearish Amid Production, Weather Forecasts Ahead of EIA Data
Therefore, nothing shocking or unexpected in today's number; though we know there are likely 100 Bcf builds forthcoming because this summer's extreme heat is in the rear view, and we are seeing and experiencing in many parts of the U.S. weather patterns that will drive low demand going forward.
NatGas Weather.com: Sep 21-27: The southern US will be very warm w/highs of mid 80s to 90s. The rest of the U.S. will be comfortable on a mix of weak weather systems and weak high pressure w/highs of upper 60s to 80s for light demand. A weak tropical system off the Carolinas will drift northward into the Northeast Fri-Sun w/heavy showers. Overall, Low to Very Low national demand the next 7 days.
So it is very likely the price is falling like a proverbial knife because of Bank of America indicating a mild winter could push prices below $2.
Seeking Alpha Bluegold Trader: Bank of America said that while the heat wave in Texas this summer did almost halve the U.S. gas storage surplus, a mild winter could still leave inventories at record highs and push prices below $2 per MMBtu in the first quarter of 2024.
Because one knows--this being again the seasonal shoulder doldrums--that demand (as mentioned above) is noticeably less.
Seeking Alpha Bluegold Trader: With seasonally milder weather coming, LSEG forecast U.S. gas demand, including exports, will ease from 95.6 bcf/d this week to 94.5 bcf/d next week. Those forecasts were lower than LSEG's outlook on Monday.
As demand in the form of exports, especially LNG, will be less with some maintenance expected like that being witnessed at Cove Point.
Seeking Alpha Bluegold Trader: Gas flows to the seven big U.S. LNG export plants have averaged 12.8 bcf/d so far in September, up from 12.3 bcf/d in August. That compares with a monthly record of 14.0 bcf/d in April.
IIR Energy: LNG Flows
So the obvious concern is where will storage inventories be at the end-of-winter season, for we are likely to enter such just above 3.8 Tcf. Therefore, let's revisit the Bank of America's mild winter announcement.
Reuters: Mild winter could push natural-gas prices below $2 per million BTUs in first quarter of 2024, Bank of America says
Bank of America on Tuesday said that while the heatwave in Texas almost halved the U.S. natural gas storage surplus, a mild winter could still drive stocks to records and push prices below $2 per million British thermal units (mmBtu) in the first quarter of 2024. The bank said the storage trajectory posed downside risks to its $4 per mmBtu projection for 2024.
U.S. production was on track to rise from a record 98.1 billion cubic feet per day (bcfd) in 2022 to 102.7 bcfd in 2023 and 104.9 bcfd in 2024, according to the EIA.
On Tuesday, U.S. natural gas futures settled at a near six-week high of $2.848 per mmBtu on a decline in daily output and a rise in supply to the country's LNG export facilities.
However, gas inventories were still expected to finish the 2023-24 winter season near five-year highs, at 1.77 trillion cubic feet, analysts at the bank said in a note.
"If realized, this inventory path may cause Henry Hub gas to trade below our forecast of $3.50/mmbtu (4Q23/1Q24) and below the current forward curve," the bank said.
Such a situation could also reignite the possibility of hitting storage constraints next year, it added.
Now one wonders what is our winter outlook during this El Nino period.
Is it likely to be a mild winter for the Northern Hemisphere? Well...
UnOfficial Networks: Winter Weather Forecast 2023 -- 2024 | This Winter Will Not Be Normal
Looks like this winter will be very different vs. past winters because of one thing.......El Nino. But how will El Nino Impact this winter and why will it not be normal simultaneously?
David Schlotthauer
And there is evidence a Polar Vortex is forming.
Severe-Weather Europe: A Polar Vortex is starting to form in the Stratosphere over the North Pole and will impact the Weather as we head closer to Winter 2023/2024
A strong Polar Vortex usually means strong polar circulation. This usually locks the colder air into the Polar regions, creating milder conditions for most of the United States and Europe. In these conditions, the Winter can be mostly warmer than normal across the mid-latitudes.
In contrast, a weak Polar Vortex can create a weak jet stream pattern. The colder arctic air is harder to contain, which can now escape from the polar regions into the United States and/or Europe. Image by NOAA.
So, as you can see, having a strong or weak Polar Vortex can significantly change winter weather in the United States, Canada, and Europe. But the Polar Vortex is not a simple entity to forecast, as it depends on many small- and large-scale factors.
Therefore, in conclusion, $5 natural gas HH pricing by next May hinges simply on weather (pun intended) or not Old Man Winter can be troubled to get out of bed in the Northern Hemisphere. And, that one cannot yet say for certain but if the Northern Hemisphere--North America, Europe, Asia--experiences yet another mild winter be prepared for prices to be weak as inventory levels will be high exiting this 2023/2024 winter season.
Therefore, let IIR Energy's Dedicated Market Research place the world at your fingertips. Tomorrow's News Today. Ask us! We have Answers!
As your feedback is very important to us, please let us know if we may provide additional color or answer any other market questions you may have by replying to this note.
Additional IIR Resources:
FXEmpire: Commodities: Natural Gas
With today, it was seeing a marked fall-off of ~$.20, mostly because of bearish news entering this seasonal shoulder doldrums (Sep., Oct.) picture.
FXEmpire: Natural Gas Prices Forecast: Bearish Amid Production, Weather Forecasts Ahead of EIA Data
- Record 2022 gas production witnessed over 100 bcfd; forecasted 104.9 bcfd by 2024.
- Texas summer heat spiked August prices; September sees slight dip.
- Mild winter could push prices below $2 per mmBtu in early 2024, according to Bank of America.
- EIA weekly storage report expected to show a 65 Bcf build.
Therefore, nothing shocking or unexpected in today's number; though we know there are likely 100 Bcf builds forthcoming because this summer's extreme heat is in the rear view, and we are seeing and experiencing in many parts of the U.S. weather patterns that will drive low demand going forward.
NatGas Weather.com: Sep 21-27: The southern US will be very warm w/highs of mid 80s to 90s. The rest of the U.S. will be comfortable on a mix of weak weather systems and weak high pressure w/highs of upper 60s to 80s for light demand. A weak tropical system off the Carolinas will drift northward into the Northeast Fri-Sun w/heavy showers. Overall, Low to Very Low national demand the next 7 days.
So it is very likely the price is falling like a proverbial knife because of Bank of America indicating a mild winter could push prices below $2.
Seeking Alpha Bluegold Trader: Bank of America said that while the heat wave in Texas this summer did almost halve the U.S. gas storage surplus, a mild winter could still leave inventories at record highs and push prices below $2 per MMBtu in the first quarter of 2024.
Because one knows--this being again the seasonal shoulder doldrums--that demand (as mentioned above) is noticeably less.
Seeking Alpha Bluegold Trader: With seasonally milder weather coming, LSEG forecast U.S. gas demand, including exports, will ease from 95.6 bcf/d this week to 94.5 bcf/d next week. Those forecasts were lower than LSEG's outlook on Monday.
As demand in the form of exports, especially LNG, will be less with some maintenance expected like that being witnessed at Cove Point.
Seeking Alpha Bluegold Trader: Gas flows to the seven big U.S. LNG export plants have averaged 12.8 bcf/d so far in September, up from 12.3 bcf/d in August. That compares with a monthly record of 14.0 bcf/d in April.
IIR Energy: LNG Flows
- On a daily basis, however, feed gas fell to a one-week low of 12.4 bcf/d due to a reduction at Berkshire Hathaway Energy's 0.8-bcfd Cove Point LNG export plant in Maryland. Traders have said that Cove Point was on track to shut for about a week of planned maintenance around Sept. 21-29, according to company notices to customers.
So the obvious concern is where will storage inventories be at the end-of-winter season, for we are likely to enter such just above 3.8 Tcf. Therefore, let's revisit the Bank of America's mild winter announcement.
Reuters: Mild winter could push natural-gas prices below $2 per million BTUs in first quarter of 2024, Bank of America says
Bank of America on Tuesday said that while the heatwave in Texas almost halved the U.S. natural gas storage surplus, a mild winter could still drive stocks to records and push prices below $2 per million British thermal units (mmBtu) in the first quarter of 2024. The bank said the storage trajectory posed downside risks to its $4 per mmBtu projection for 2024.
U.S. production was on track to rise from a record 98.1 billion cubic feet per day (bcfd) in 2022 to 102.7 bcfd in 2023 and 104.9 bcfd in 2024, according to the EIA.
On Tuesday, U.S. natural gas futures settled at a near six-week high of $2.848 per mmBtu on a decline in daily output and a rise in supply to the country's LNG export facilities.
However, gas inventories were still expected to finish the 2023-24 winter season near five-year highs, at 1.77 trillion cubic feet, analysts at the bank said in a note.
"If realized, this inventory path may cause Henry Hub gas to trade below our forecast of $3.50/mmbtu (4Q23/1Q24) and below the current forward curve," the bank said.
Such a situation could also reignite the possibility of hitting storage constraints next year, it added.
Now one wonders what is our winter outlook during this El Nino period.
Is it likely to be a mild winter for the Northern Hemisphere? Well...
UnOfficial Networks: Winter Weather Forecast 2023 -- 2024 | This Winter Will Not Be Normal
Looks like this winter will be very different vs. past winters because of one thing.......El Nino. But how will El Nino Impact this winter and why will it not be normal simultaneously?
David Schlotthauer
And there is evidence a Polar Vortex is forming.
Severe-Weather Europe: A Polar Vortex is starting to form in the Stratosphere over the North Pole and will impact the Weather as we head closer to Winter 2023/2024
A strong Polar Vortex usually means strong polar circulation. This usually locks the colder air into the Polar regions, creating milder conditions for most of the United States and Europe. In these conditions, the Winter can be mostly warmer than normal across the mid-latitudes.
In contrast, a weak Polar Vortex can create a weak jet stream pattern. The colder arctic air is harder to contain, which can now escape from the polar regions into the United States and/or Europe. Image by NOAA.
So, as you can see, having a strong or weak Polar Vortex can significantly change winter weather in the United States, Canada, and Europe. But the Polar Vortex is not a simple entity to forecast, as it depends on many small- and large-scale factors.
Therefore, in conclusion, $5 natural gas HH pricing by next May hinges simply on weather (pun intended) or not Old Man Winter can be troubled to get out of bed in the Northern Hemisphere. And, that one cannot yet say for certain but if the Northern Hemisphere--North America, Europe, Asia--experiences yet another mild winter be prepared for prices to be weak as inventory levels will be high exiting this 2023/2024 winter season.
Therefore, let IIR Energy's Dedicated Market Research place the world at your fingertips. Tomorrow's News Today. Ask us! We have Answers!
As your feedback is very important to us, please let us know if we may provide additional color or answer any other market questions you may have by replying to this note.
Additional IIR Resources:
- IIR Team Email: iirteam@iirenergy.com
- Latest IIR Crude & Products Market Scorecard
