Another double-digit gain (13.5%) for the NG market this week. Strong heating demand, record LNG production and production declines have led to a two year high for NG pricing. But that was last week, and this week brings a new set of completely different fundamentals. Production began recovering form freeze offs close to 6 BCF/d yesterday. The has not been any lasting concerns with additional OFOs (operational flow orders) issued for the upcoming week, meaning production should return to pre-freeze off levels to 103-105 BCF/d. US NG production was metered 100.2 Bcf/d Friday vs. 99.9 Bcf/d Thursday, according to Wood Mackenzie. Estimated gas production for today is approaching 103 BCF/d while demand is falling back. Domestic gas demand was set to plummet more than 10.0 Bcf/d to 123.5 Bcf/d this past weekend, the firm’s data showed. This weekends set up has been a good opportunity for shorting this current market, due to rapid price appreciation over the last two weeks. If this was the middle of January, it would be a different situation, but due to being five weeks away from the net withdrawal period of the demand season, this presents a whole new set of opportunities and issues to be watchful for.
The cold spell and “Polar Vortex” have faded and market exhaustion is emerging. The 4400 level has acted as resistance. With the April contract becoming the front month contract in a few days, the seasonal fundamental will become more relevant. The European NG marker, the TTF, is down 20%, since the middle of the month. This is reminiscent of the double top of the market in 2022, when the TTF spiked and the HH benchmark double toped for yearly highs, only to drop after. History does not repeat, but it does rhyme! So, my belief is that we will see a pattern emerge, considering past behavior and adding in the short-term weather models, to line up for another tremendous entry point for longs. In the meantime, while the market panics over the impending warm up, we will use the power of meteorology and the new market structure, to short the market the next 7 days then prepare for another period of price appreciation. This coming weekend just might be one of those weekends where I sit out taking a position. I will need the models to begin to verify the coming cold for the end of March and beginning of April in the printed HDD data. But since the big boys cannot see it either, I am using the meteorology to beat them to the punch. This week I will be posting updates to the model runs for you to know what I am seeing.
The market opened just above the 4000 level today and my belief is it should settle down at the 3900 level by market open in NY Monday morning. The night time model runs will be important, being the first model run of the trading week. The weeks temperatures look inline with the Phase 8 of the MJO, and we expect the MJO to continue into its reset with Phase one by next weekend and 2,3, and so on. The market is expecting its normal spring time warming and demand to back down. This week’s storage report is expected to be plus 270 BCF, which will put deficits above 230 BCF vs the 5-year average. So, there can be some expected volatility in the daily moves this week, with the models providing the input for daily swings and the general warming trend to provide market direction. I will be looking at the April contract’s 61.8% level, 3640, from its current swing low/high, to reenter a long position (which will be the current traded contract on Wednesday). I will trade the intraday volatility, after the models print and the report day print. There should be some good trading in a downward channel for the next ten days or so, intraday.
As for my belief on the fundamental reasons for the price to rebound the back half of March and early April…..
LNG production! This week Federal regulators have approved Plaquemines (Plaqs) export facility to produce more LNG. The facility this week hit a peak at 1.7 BCF/d in production, with an estimated capacity of 2.0 BCF/d. The company is almost complete with commissioning its nine trains, out of eight completed. It is expected to have the ninth train completed very soon to bring production up to the 1.9 BCF/d. The company has been granted approval to increase production up to 3.6 BCF/d. Venture Global (the parent company of Plaqs) is not expanding the plant to achieve the production increase. Instead, it plans to rely on train efficiencies to boost output. So, this is not going to need or have any construction delays, just an increase in efficiency. Corpus Christi has shipped out its first cargo this week and is in the process of commissioning three additional trains at the facility. It has one that is producing now and with the other two to come online add an additional 1 BCF/d. The repairs at Freeport seemed to have stabilized production and production has been at its most consistent since operation began. We expect that LNG export to end 2025 somewhere in the 17.5 BCF/d. Export has been averaging 15 BCF/d over the last twelve months, an increase of 15% by mid-April. So forward demand for the year looks promising!
Additional demand for electricity…. The Edison Electric Institute reported a 10.9% increase in U.S. electricity output for the week ending February 15, highlighting strong utility-driven demand. With only 99 active natural gas drilling rigs in operation, a meaningful increase in production appears unlikely in the short term. NG power burn is now more than 17% higher than 5 years ago, and this is not including the multitude of AI facilities in active production and to go online this year.
Additional demand for a late start to spring…. I will not bore you again this post about the upcoming SSW event that is currently beginning up in the stratosphere. For clarification, please see my pervious idea form Monday 2/17/25. We should expect a late spring and the heating demand should continue into early-mid April. With a colder than average early spring.
Decreased storage… Again, see last week’s idea about where supply is heading. I showed how storage levels are correlated to price. The lower the storage levels the higher the price.
Keep it Burning!
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Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.