Ashes, ashes, we don't fall down; US gas sees surplus now, also coming boom
August 9, 2024
Key Observations:
In each of the past six months, natural gas prices in the Waha cash market have settled below zero with greater frequency than in any other month in the past five years. The month-to-date figure for daily subzero closes in August 2024 is 86%, second only to April 2024 at 91%. The low for daily frequency since Feb-24 is 20% (June 2024). This exceeds prior high since Aug-19: 18% (Oct-2020).
Subzero gas prices at Waha Hub occurred in just 10 of the 53 months between August 2019 and December 2023 (19% frequency). But subzero prices have occurred in 6 of 8 months in 2024 (75% frequency). Since Feb 1: 100% frequency.
What changed? Two main factors. First, on Jan. 26, 2024, the Biden Administration announced a “pause” on permitting of new licenses for LNG exports. This has increased pressure on physical schedulers to price deals to move gas inventory at any cost (including paying the buyer). Second, an exceptionally hot winter led to a steep contraction in winter season heating demand in 2023/24 from residential and commercial consumers (the segment’s demand is still -4.6% ytd yoy) and an associated increase in inventory overhang.
Meanwhile, global balance, strained by Russia’s assault against Ukraine, is more dependent than ever on U.S supplies that may or may not be sufficiently forthcoming. Today, both the UK and TTF frontline gas prices closed above the LNG marker price in USD terms ($12.55). The rise in NG1 prices signals markets expect US exports.
Source: Bloomberg, Blacklight Research.
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