The Lower 48 natural gas market has had the most bearish start to a new year in a long time. Production has been at record highs, an exceptionally warm start to January suppressed demand, and LNG exports have been hobbled since last June when Freeport LNG went offline. The CME/NYMEX Henry Hub February gas futures contract slid to an 18-month low of $2.94/MMBtu last Thursday and expired Friday at $3.109/MMBtu, down 54% from where the prompt contract closed just two months earlier. The March contract extended the slide Monday to a 20-month low of $2.677/MMBtu. Freeport’s eventual return will restore existing export capacity, but there’s no new LNG export capacity due online this year — for the first time since 2016. After one of the tightest gas markets of the last decade in 2022, the stage is set for one of the most oversupplied markets we’ve seen in years. But the bulls out there can take solace: 2023 will also mark the final throes of the kind of oversupply conditions that defined the Shale Era as we know it. In today’s RBN blog, we discuss how we got here and RBN’s outlook for natural gas supply and demand.
If you’re suffering from a bit of whiplash from the gas market, you’re probably not alone. How did we go from almost $10/MMBtu gas and one of the tightest, most volatile markets in over a decade to sub-$3/MMBtu gas and one of the most bearish scenarios we’ve seen in a long time — all in the span of just over six months? Undoubtedly, the gas market has become increasingly volatile and notoriously hypersensitive to weather anomalies and market disruptions in recent years, and there was no shortage of that in 2022.
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