Natural Gas: Power Burn Hits New Record High For This Time Of The Year
Summary
- Power burn is hitting an all-time high for this time of the year.
- We estimate power burn is set to make a new all-time high in early July.
- Global LNG prices also have started to bottom and move higher.
- Looking for a helping hand in the market? Members of HFI Research Natural Gas get exclusive ideas and guidance to navigate any climate. Get started today »
Welcome to the record edition of Natural Gas Daily!
Power burn is going to hit a new all-time high this year with the peak being ~3 Bcf/d higher than the previous high (also dependent on how warm the weather gets).
At the current pace, we are likely to surpass ~45 Bcf/d by early July and hit a new all-time high this summer. This will bode very well for summer gas balances, while also insulating the US gas market from the recent drop in LNG demand.
LNG exports are expected to match last year's levels this summer.
The recent drop in LNG exports is because of falling LNG prices which have made US LNG exports uneconomic.
But given how low prices are, suppliers have started to curtail supplies, which have recently pushed prices back up. Keep in mind also that most of the LNG contracts are Brent-linked, so as Brent recovers past $40/bbl, the pressure also will subside.
The combination of the record power burn demand for this time of the year combined with recovering global LNG prices has pushed prices higher, albeit at a slow pace. And despite US shale oil producers restarting production from shut-in wells, lower 48 gas production remains depressed.
The net effect is that the near-term contracts will continue to ebb and flow with where global LNG prices are, but as power burn demand increases, cash prices will get supported. This should help tighten fundamentals, reduce storage injections, and keep prices supported.
We remain short DGAZ.
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Comments (49)
I'm remaining cautious and taking profits each day early and re-buying late. It's been a steady 6%+ buying at 14 or better and selling around 14.90. I've lightened up on oil positions now so have cash to use here or with gold miners, whichever one decides to start a move up.
