Natural Gas Maintains Low Prices Even in Winter

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Editorial by Geoffrey Lakings for Industrial Info Resources (Sugar Land, Texas)--As the calendar flips from January to February, natty prices find themselves once again with a $2 handle--even in the depth of winter.

February 2023: As since last August natty prices have plummeted from highs around $10, and even in December--before the Holidaze--the market was flirting with $7; however, since then the proverbial bottom has fallen out. Like into the natty pit of despair and apathy.

• FXEmpire: Natural Gas Price Forecast -- Natural Gas Markets Continue to Look Anemic: Natural gas markets have gone back and forth during the trading session on Wednesday again but continue to show plenty of negativity. At this point, the $2.50 level offers a bit of a large, round, psychologically significant figure that people will be paying close attention to. If we break down below there, then it's likely that the natural gas market goes much lower, perhaps reaching to the $2.00 level. That of course would be a major coup for the short-sellers, so obviously would catch a lot of attention.

For Old Man Winter simply cannot be bothered to show up with much consistency. Oh, he blustered some with Winter Storm Elliot. And this recent "Arctic intrusion" cold front. But then he slumbers some more.

• NatGasWeather.com: "Feb 1-7: Frosty conditions will continue across the northern and central US this week w/rain, snow, and chilly lows of -20s to 20s for strong demand, while aided by lows of 15F to 30s into Texas the next few mornings. The far West will be comfortable w/highs of 40s to 60s, while nice over the Southeast w/highs of 60s to 80s. Cold air will retreat to the northern tier this weekend, while the southern 2/3 of the US warms into the nice 50s to 70s. Overall HIGH-VERY HIGH demand the next 4-days, then LOW.."

Though according to the World Climate Service Spring Outlook we are looking to a volatile spring.



A spring when Freeport LNG will likely be in service once again.

• Reuters: Fire-idled Freeport LNG seeks U.S. approval to start one unit: Freeport LNG in a filing dated Monday asked the U.S. Federal Energy Regulatory Commission (FERC) for permission to put gas into one of the plant's three liquefaction units for "initial LNG production."
  
  Even with the steps proposed, analysts believe it could be months before the plant's three units will be fully operational. According to these analysts an expected timeline for restart remains mid-March with an expectation it will take about 60 days from this restart to full utilization. JERA, one of Freeport's five big customers, said it was not counting on getting LNG from the plant by the end of March.

As Spring into Summer is when we will begin to see more competition for global gas cargoes into Europe as well as Asia.

• Morningstar: Europe vs China: The Scramble for LNG: ...Europe's competition with Asia over LNG supplies reflects a reversal of familiar pricing dynamics. "Historically, gas in Europe cost less than LNG in Asia, then the short market (the differential rewarded the Asian market for the first time in December 2021) and the war reversed the trend; and now weather and full storage tanks have brought the TTF back below the JKM (Japan Korea Market)," explains Massimo Nicolazzi, professor of Economics of Energy Sources at the University of Turin.
  
  This means Chinese consumption has become a major factor, alongside weather and infrastructure, driving Europe's gas market. "In 2022, Chinese LNG imports fell by 21 bcm against an increase in pipeline imports of 5 bcm. We expect imports from Russia by pipeline in 2023 to bring an additional 7 bcm. What is going to happen to consumption in China in the post-Covid regime now established is difficult to predict. Nevertheless, if demand picks up again, it will mainly be for LNG and that will not be good news for European prices or supplies," Nicolazzi says.

A China -- though opening back up -- which finds itself in a predicament.

• LiveMint: Russia's 'energy weapon' is hurting China too: Europe has had a tough winter--but warm weather and a herculean effort to find new natural gas supplies has limited the economic damage from Moscow's decision to curb gas exports to the continent. Some of that damage is instead showing up in a very different gas market and one Russia is counting on for its growth: China.
  
  Part of what is happening is simple bad luck. Unlike in Europe, winter in parts of Northern China is proving to be bitterly cold. But high gas prices in China also reflect an uncomfortable reality: Russia's decision to weaponize its heft in global gas markets is creating economic and political problems for Beijing now, while the new pipelines needed to fully capitalize on China's deepening partnership with Russia are years away.

Obviously there is still much uncertainty about what truly lies in store for these global gas markets 2023 into 2024; although Oxford Institute for Energy Studies provides a podcast with their thoughts and insights.

• OIES Podcast -- The Outlook for Global Gas Markets in 2023: In this OIES podcast James Henderson talks to Mike Fulwood and Jack Sharples about the current state of the global gas market and in particular the outlook for the supply and demand balance and prices in 2023. They examine the current state of supply to Europe, including Russian flows, LNG imports and other sources of pipeline gas before discussing demand in a number of regions of the world. They then consider the current state of European gas storage and what the outlook could be for 2023, before they finally discuss the outlook for prices and whether the current benign state of the market offers a positive outlook for the next 12 months or masks potential threats to supply and a risk of higher prices to come.

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