Love the optimism! ….. Could live with a bit less of “To the Moon🚀🚀🚀…. without further analytical commentary…."
Im enjoying the optimism that this market has been so starved of for the last 7 months. God knows this market can use the love.
But ……. as I see some individuals calling for $30 by end of March,…..or I almost flipped when I saw someone put out their $100 guesstimate for the end of May……. Sounds great to me! ……But on what planet?
There’s nothing saying that $30 is absolutely off the table……However,….
The only problem that I have with highly targeted price targets being met, especially by given dates, is the fact that they are almost without exception given without ANY empirical data or analysis whatsoever ,whether technical or fundamental, as to how these folks are expecting NG to achieve these “seemingly” lofty goals.
As someone who works their tail of researching every nook and cranny of this market for any bit of actionable intelligence I find, its a little bewildering to see individuals, some with handles including words like “ analysts” “research” and other such misleading buzzwords to identify themselves, throwing out these numbers with absolutely ZERO thesis as to how they are arriving at them.
Perhaps they could take the time to enlighten the rest of us by at least sharing their analysis with the community…. even if its wrong, or wildly speculative . At least that separates the delusional from the absurdly insane. But throwing out eye popping numbers with no credible data to help the comunityunderstand where they are coming from other a fabulous state of hope is simply not very helpful.
We all believe Natural Gas has some great long term prospects. It’s important to remember that both BOIL and UNG are entirely based on the U.S. price of Natural gas….. not global. It only has reflexive responsiveness to the latter to the degree that we can get it out of our country via LNG.. And our U.S. price is based on a rather simple formula.
1). How much we produce from week to week (-)
2).What we burn through ( net injections or withdrawals from storage inventories (-)
3). Total LNG net exports
2).What we burn through ( net injections or withdrawals from storage inventories (-)
3). Total LNG net exports
4). expectations as to how the former will interact between themselves
5). Oh…. and lets not forget misinformation . My favorite puveyor of which is MT Newswire,,….. who regularly semantically words their articles to reflect half truths or things that have no basis in truth at all. For istance they just today published an article as to why Gas is still so low citing that Freeport LNG remains “offline” as in shut down, non operational etc. This is a pretty big mistatemet of fact in a market whose every move hangs on actionable intelligence regarding Freeport LNG’s reopening process. If theyre still still shuddered, how is it that the first loaded vessel came to arive in Europe from Freeport LNG over the weekend?……. Do they have a copy editor?
Right now the largest unknown variable is though Freeport’s exact pace of acceleration back to full capacity of pulling 2.1 Bcf/ day of. NG off the U.S market and turning it into LNG for export. By my crude measurements, they should be pulling almost 50% of their capacity by weeks end if theyre not there already. And though our weather this winter has been an utter disappointment for the NG bulls this winter, Id say that ship has sailed and that reality is already pretty much in the price of the market to say the least.
Right now the largest unknown variable is though Freeport’s exact pace of acceleration back to full capacity of pulling 2.1 Bcf/ day of. NG off the U.S market and turning it into LNG for export. By my crude measurements, they should be pulling almost 50% of their capacity by weeks end if theyre not there already. And though our weather this winter has been an utter disappointment for the NG bulls this winter, Id say that ship has sailed and that reality is already pretty much in the price of the market to say the least.
Freeport’s absence has exacerbated the entire situation by the lackluster pace of their reopening backing up excessive production meant to go overseas via Freeport into storarge which is at, and or near capacity in certain areas of the country especialy the south central region
The good news is……. Freeport is in fact now in motion again and has recently been given regulatory approval to operate two of their three trains to produce LNG for export. And again, the first shipment of LNG in 8 months has just arrived in Europe from Freeport, and there are now a consistently growingnumber of ships off of Freeport queing up to dock and fill for export .
So the big question now is turnaround….. how much and how fast can they get it offshore and keep it moving.
And in the last week LNG is now again starting to see a surge in spot market especially from India. China’s usage is slowly but increasingly beginning to recover and as the COVID curse eases and their economy gets going again, their usage can be expected to meaningfully contribute to overall competitiveness for supply, especially with the potential for the Taiwan conflict wildcard continuing to loom large as an ever increasing concern. As if China invades Taiwan, they will need to source LNG from anywhere they can pull it in…… outside any U.S. sources…….. which would put pressure on Middle east exporters, diverting more of their current European exports to China, thereby creating a greater reliance on the U.S. as “the” preeminent source of LNG for all of European importers.
Addtionally, this is now the first injection season Europe will be facing without its reliance on Russian Gas. Noone knows quite how thats going to pan out yet. They got lucky and dodged a huge bullet this year with unseasonably warm weather accross the entirety of Europe, and their ability to be able to secure enough LNG from the U.S., the Middle East and Australia early enough to bring their storage levels to near capacity just before the cooler weather arrived. But how that plays out in this next year is a big what if.
In the mean time, with summer on the horizon, and back to back hotter than ever record breaking global temperatures and energy usage for cooling demand, theres a fair amount of territory for prices to run between now and July.
Last summer things in the U.S. got formidably hot. For the first time ever in recent history anyway, Wild fires raged accross western Europe, and British citizens were actually dying from heat exhaustion. Should we have another one of these summers, which my hunch is that we will, there will be plenty of demand for LNG as Europe continues to rush to put in place both floating and fixed LNG degassifiation infrastucture to meet its growing dependence on LNG.
So the demand side of LNG is looking good and rather consistent over the foreseeable future. And I suspect that as buyers begin to get their heads around the fact that we have “probably” seen the bottom of this market, they will become more aggressive in bothe the spot and the futres market to hedge themselves against higher prices as time marches forward.
Our issue in all of this is in export capacity. We are currently pretty regulary shipping LNG from the U.S. terminals at capacity which is why Freeport is so crucial in moving the price of NG off this floor in a meaningfully short period of time. As currently the price of NG is still below the cost of production which is estimated to be a touch under $3.00 Mmbtu +/-. This is forcing producers to allow wells to exhaust themselves without replacing them and is starting to incentivize producers to hold off on any new drilling for now, and keeping them from opening already drilled but untapped wells to avoid adding to additional production until demand and pricing improve.
However , as interest rates go higher, producers that are highly levered will be forced to continue to produce at any price jsut to service the debt that they perhaps ahould have payed down aggresively when they were recently awash in money. So thats a twist, but hopefully not a major one.
The recent bounce off the floor of NG as it broached the $2.00 Mmbtu was powerful and will hopefully have some teeth. Again Exports are the key…. So for now its still a bit of a “Freeport story.” They could be back up to near capacity within the coming month if they get approval to utilize all three of their existing trains.
The rest is about whats on the horizon. Freeport is planning on adding a fourth train which would add 33% to their capacity. But that date of completion and operation commencement is not yet clear. Additionally, Tellurian is a wild card. Theyve gone profitable, have had an excellent YOY growth rate, and my guess is that someone is going to directly fund their currently underway but on hold expansion which would significantly increase their output capacity.
There are are a handful of other major expansions currently underway by several foreign and domestic interests building new and additional capacity trains in the Gulf region expected to come online sometime in 2024 and 2025 . All of this bodes well for increasing U.S. export capacity rather significantly. All of this new export capacity shaves supply off the U.S. market, which will in turn put upward pressure on U.S. prices,…. which when trading here,…. is the name of the game for the bulls.
As much as I love projections that are “ to the moon 🚀” , they arent helpful as anything but a “lure” to anyone who may not know very much about the NG market…… which is the last market anyone should be trading that doesnt have some sort of handle on it. So I just wanted to put that out there in hopes that those who are floating these numbers might share some of their clairvoyance with those of us who are stuck using that boring stuff known as “ data” to try and make sense of and evaluate the market.
Either way, Good luck everyone! Lets hope the bulls stay in the game. On Balance Volume has made a meaninful change in direction and velocity since last Tuesday. There’s reason to believe that as weve filled that hige chasm of a gap left from Friday here today, and then almost immediately turned around, rallied back up and exceeded yesterdays highs, we could be on another healthy trajectory higher.
Should we break “through” $6.89 with any momentum whatsoever , accellerated velocity and momentum could manifest taking us comfortably higher to the $7.70 range in short order…..or….higher….
How high?…….. To the Moon🚀 !!! …of course!!!🥳👍
Disclaimer: Community is offered by Moomoo Technologies Inc. and is for educational purposes only.
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