Welcome to another month, and another week everyone! I hope you are all doing well.
We’re almost done with the first half of 2025, and what a turbulent year so far. It feels like we’ve had 1 or 2 years worth of news and price moves in the last 6 months.
It’s exhausting, so remember to take a break when you need it. Your trades are only as good as your mental health.
Where we are, and where we’ve come from:
It’s become quite clear of the last several weeks, that news / headlines are gripping markets more than ever. We started to move back to fundamentals briefly about 2-3 weeks ago, that seems to be lost again, for now.
Over the last 2 months, most Exporters have been pushing out their maintenance windows for later this year. Until recently, exports were booming, they have dropped back just a little bit.
Producers have been moving rigs, and performing maintenance, as the data has shown and reflected.
1 Rig generally services 7-10 wells. So as a rig gets moved or goes down for maintenance, we’ve seen decent drops in production.
Geo-politics and speculation have been the driver for price recently, in my opinion. When we get bigger EIA injections and bearish forecasts, the markets have flipped back aggressively and ended the day positive regardless. The question is, how long can this last?
My suspicion, not much longer.
Now:
We’ve been watching Production bounce back nicely from maintenance periods. In a way, prices being higher right now is good. Producers will get greedy, as they always do, and bring too much supply online.
There’s a lot of talk about “Exports sky rocketing” or “Future Exports” blah blah whatever. There are no new export projects coming online until the first half of next year, and even when they do, Producers have a responsibility to the US to keep up with production. So, as exports continue to stay strong and steady, Production will continue to creep higher.
In my mind, we’re at a much larger risk of rapid downside, instead of rapid upside, and this is why.
Production for the most part, is all Land based. Only roughly 4% of production is offshore.
This Hurricane season is meant to be quite strong, some say it could be the strongest we’ve seen yet.
This, in my opinion, leave huge downside potential open for Natgas prices. The majority of export facilities are all in the Gulf of Mexico / Gulf of America. This is where most Hurricanes form and hit.
Production is threatened by only 1 force generally, and it’s winter. Winter usually freezes over the wells and cuts production.
How I see this playing out: Forecasts are showing a bit of a unforeseen cold snap is coming down and will keep the US cooler for longer heading into Summer, delaying any potential cooling demand by several weeks.
As that’s happening, Production is continuing to recover.
It appears to me, the “Make or Break it” for many Analysts is the Year over Year comparison to the EIA storage, not so much the 5 year average.
Luckily, this is build into the website, under the “EIA Forecast & National Storage” tab. The 5 year average, and comparison to 2024 is there. Right now, many are focused on the comparison to 2024, which is still -14% compared to this years current levels, but it’s falling rapidly.
I think for now, that’s the big number to watch. If we continue to see the 2024 comparison drop rapidly and recover, then we’ll still see Natgas drop below $3.
If we stay negative for the rest of the year, then we’ll like stay well above $3.
Production is also critical, we’ll need to see production continue to creep back into the 106bcf and then 107bcf range to give us that confirmation. If and when we do, that’ll be my signal that the next bearish leg is ready.
Looking out:
Looking very far out and generalizing. Summer is forecast to be average or cooler in the East, and a bit warmer in the West, but nothing too crazy. (forecasts can change).
Hurricane season is upon us, they’re expecting some very large, very strong Hurricane’s this year, equal to or bigger than last year.
Winter 2025 / 2026 is shaping up to likely be quite cold.
As long as production keeps ticking higher, and the current forecasts remain, I’m looking for a steady grind lower for the rest of the year.
I’m then looking for a very strong rally heading into winter, as storage will likely get smashed again this year.
Thing to remember and look-out for:
1) Potential Ukraine / Russia ceasefire, offers are still on the table, so it can’t be ruled out yet.
2) Coal power plants. Now for this one, there’s was a bit of confusion. Biden had effectively started shutting down most US Coal power plants. When Trump came back, he stopped and order them to stay online. So the companies have had to stop, and start bringing those plants back online, which takes time. We should see those affects soon.
3) Europe Natgas Storage levels. If Europe keeps chugging away, and has an average summer of demand, their storage should fill up rapidly, which will likely put bearish pressure on US prices.
4) Opec+, the EUA and Sudai Arabia are quite unhappy the US has become the worlds largest export of Natgas and Oil. They are making huge moves to flood the markets, and regain control.
I believe the EUA has one of the largest Natgas Export projects coming online in the near future. They’re certainly worth watching.