The Venture Global LNG contracts with Sinopec are likely the big energy news of the day, as is the expectation that the West Louisiana terminal is close to completion and could begin shipping as soon as late 2021, according to a report in the Financial Times today. This would be earlier than prior guidance and will add demand pressure to a US natural gas balance that is already tight (distracted in the immediate term in our view by a wave of mild weather). With Venture Global now likely to go ahead with its second LNG facility, as well as other capacities under construction, we will likely see greater inflation in US natural gas prices without increased E&P spending.
Source: EIA, Bloomberg, C-MACC Analysis, October 2021
Otherwise, while almost every story this week talks about energy shortages, US refining rates are dropping again (chart above), despite very low gasoline inventories and very high gasoline prices. This does not make a lot of sense to us as the EV penetration is not meaningful yet and the storms are behind us. There may have been an unusual number of maintenance shutdowns in the last couple of weeks, but as we noted in our Weekly Catalyst report on Monday, refining margins are strong and should encourage operating at higher rates. While some refining capacity is undergoing refits to run on bio-based inputs, it is not enough to explain the recent dip.