Director of Natural Gas Sales
The natural gas market has continued its volatile roller coaster, and at the turn of the new year, we have seen severe swings to the downside. With temperatures in the northern hemisphere staying consistently mild and the Freeport LNG facility still down, the natural gas market has continued to respond to global supply and demand economics. Storage has played a significant role in bringing the gas market to its current levels. With mild temperatures (including one of the warmest Decembers on record for the Northeast), we did not see significant withdrawals through January and February.
As Europe raced to fill its storage before winter, we saw significant storage injections occurring in the US. Now that we are through most of the colder months, storage levels are 493 bcf above the levels at the same time last year. Storage levels are 359 bcf above the 5-year average as well.1
As of March 8, 2023, Freeport LNG has received regulatory approval to restart its final liquefication train.2 Overall, it is a story of significant luck that weather was not severe across the lower 48 states. Also, the weather has been mild across most of Europe. While some may say it is better to be lucky than good, luck is not a plan or solution to the global energy crisis. Fundamentals have stayed the same for global liquified demand, and four more facilities are slated to begin exporting LNG by the end of 2023. One upside risk is the potential for extreme heat and humidity this coming summer. This could deplete US storage levels while Europe opens additional import facilities and looks to top off its storage again this summer. We do see the potential for the market to snap back towards the trendline, and while the futures are as low if not lower than the pre-invasion of Ukraine, there is still upside risk from the geopolitical happenings.
Published: March 17, 2023
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