Winter 2022-2023
Source: http://www.lapelindiana.org/news.asp?id=258&P=1
There are several factors impacting natural gas prices. First and foremost, natural gas prices have been impacted by the Russia/Ukraine conflict. Russia has limited deliveries of natural gas to Europe via the Nordstream pipeline. As of August 31st, Russia is delivering no gas via Nordstream with no date to resume service which should send European price skyrocketing if the outage continues. This has driven natural gas prices for Winter for Europe past $40/Mcf after trading over $100/Mcf…more than ten times the US price! The US is making up some of the shortfall via LNG exports to Europe and other countries. The US can export more than 12 Bcf/day when operating at capacity. Every cubic foot of natural gas that can leave this country will due to the high price overseas market. Natural gas storage is 7.4% (223 Bcf) below last year due to the US using significant natural gas consumption for power generation to meet cooling demands. Natural gas production which most had anticipated to reach 97 Bcf/day, or higher this year has not reached that point. Natural gas production is currently at its highest for the year at/near 96.5 Bcf/day and it just reached these levels after lingering below 94 Bcf/day for most of the year. These factors have allowed natural gas prices to reach 14-year highs.
It’s not all bad news for US buyers. The Freeport LNG plant which produces 2.2 Bcf/day remains offline and is currently projected to be back in service no sooner than mid-November and will likely be off longer. That pushes 2.2 Bcf/day into storage until its restart, gas that otherwise would have left the country. The next several weeks we should see strong injections into storage. NOAA just posted their updated forecast on 9/15 forecasting well above normal temperatures for November into December for most of the highly populated (high gas consumption) regions. This would push additional gas into the ground as well and could push prices lower.
The natural gas market remains volatile and we anticipate natural gas costs will be higher than last winter. Prices have somewhat decoupled from the European price and are currently trading well off the recent high prices with only January 2023 delivery trading over $8.00/Mcf on 9/16. It was only a few days ago all of winter was trading over $9.00/Mcf. The long-term outlook depends mostly on the weather trend. We will need a winter of above normal temps as a whole to bring prices down significantly. We will keep you posted on natural gas price expectations as winter nears.
