Natural Gas Market Tightens Up, But Challenges Remain

General Discussion 4 replies 0 votes 1661 views Tags:  energy marketgas productionLNG exportsnatural gasstorage levelssupply and demand
uyong jain 9 months

It looks like the natural gas market, or NG1:COM, is showing some interesting developments. The good news is that the market is starting to tighten up, and there's a deficit of 0.71 Bcf/d compared to the 5-year average. This means that the chances of storage reaching maximum levels have decreased, which is great news for natural gas bulls!

However, don't get too excited just yet. Although things are improving, storage levels are still bloated, so expect natural gas to trade between $2.5 to $3.25 until the end of injection season. The latest storage projections are indicating that injections will be below the 5-year average.

In this week's report, the balances are lower than expected, with an injection of 18 Bcf versus the 5-year average of 32 Bcf. The end-of-season (EOS) storage is at 3.9 Tcf, which is higher than the 5-year average of 3.656 Tcf.

On the supply side, Lower 48 gas production is constrained partly due to receipt restrictions on Transcontinental Gas Pipeline, with an estimated 7 Bcf restricted in July. Additionally, U.S. shale oil producers are cutting rigs, and this trend is likely to continue through the year, which will impact gas production.

As demand starts to outpace 2022, the slower production will act as a tailwind for the natural gas market. LNG gas exports will play a significant role in this, and as demand outpaces supply growth, we can expect the markets to tighten by the end of the injection season.

Now, don't get too carried away with excitement because there's still a limit to how high natural gas prices can go. Due to the bloated South Central gas storage levels, we won't see prices going much higher than $3.25/MMBtu, at least for now.

For those considering investments between oil and natural gas producers, experts suggest leaning towards oil names.  All in all, the natural gas market is in a comfortable zone. With storage injections expected to stay below the 5-year average, and fundamentals tightening, we're seeing positive signs. 

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