U.S. Natural gas inventories are 17% lower compared to year ago and 7% below five-year average - Motilal Oswal Financial Services
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Natural gas
Hot summer combined with record exports of LNG has contributed to increases in price since March 2021, leading to the highest August average since 2010.
With US gas production constrained going forward and higher LNG exports on the horizon, US gas market appears to be entering a multi-year bull market.
Shale drillers haven't been able to lift production fast enough to refill seasonally low inventories, while LNG exports are near an all-time high.
Arrival of Hurricane Ida, resulted in more than 90% of offshore natural gas production in the Federal Offshore Gulf of Mexico being shut in during late August.
Unusually cold winter in Europe as well as a global rebound from Covid-19 have triggered strong demand and depleted natural gas inventories.
Europe is struggling to refill natural gas inventories, with flows from No. 2 supplier Norway currently limited due to maintenance. Gas in storage is 16% below 5-yr average and at a record low for Sep.
U.S. Natural gas inventories are 17% lower compared to year ago and 7% below five-year average
Outlook
To catch up to the five-year average storage level by early November, the U.S. would have to inject roughly 90.4 Bcft each week from now, about 40.6% higher than the fiveyear average weekly build-up pace.
That would require a rapid ramp-up from producers, which is difficult. • With the natural gas market now starting to price in a colder than normal winter possibility. • A severe winter in U.S., let alone elsewhere, would mean world needs many independent market players to make just right, urgent decisions to prevent an even crazier surge in gas prices
Henry Hub prices could soar to $8 in order to temper U.S. LNG demand, keep more supplies at home to fuel domestic heating needs and winter which will prove colder than average. Our previous Natural gas report target of $5 got achieved this month.
This will depend on some unwieldy variables, including how severe winter will be in other parts of the world, how quickly Russia starts up its controversial Nord Stream 2 pipeline and whether it revives its flow of natural gas to Europe.
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