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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Disclosure: I am/we are short DGAZ. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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2020-06-03