It is a gas, gas, gas! Every other story this week is about natural gas shortages and pricing – whether it is natural gas in the US or LNG everywhere else. The scatter diagram below from the EIA below is very interesting as it speaks of anticipation more than anything else. Gas prices are high given the level of US inventory relative to “normal”. There is speculation that demand is going to outstrip supply over the next few months. Whether much of this will be LNG-related remains to be seen as we may not be able to run the current capacity any faster – that said, through the end of July it looked like there was spare capacity at several of the US LNG facilities and maybe the constraint is shipping. Regardless, the current US price implies shortage, whether because domestic demand overwhelms supply this winter or because LNG steps up. The original timeline of the Venture Global facility at Calcasieu Pass in Louisiana has slipped and this facility will not impact demand for the next 12 months at least, with ExxonMobil’s Golden Pass project a year later and targeting a 2024 start.
Source: EIA – Natural Gas Dashboard, October 2021
In prior work, we have a show a chart of the expected retirement of coal-based power stations in the US and while some of these are being replaced with renewables, the natural gas demand for power in the US is expected to grow and this could be the determinant of how strong gas prices get, especially if some of the renewable facilities underperform because of weather-related constraints – several examples of which we have seen this year in the US and Europe.
