NatGas on Fire

Natural gas is now at $7.30 MMBtu compared with $3.73 at the end of December and $2.62 a year ago. The Russian invasion of Ukraine and the West's response to stop imports of Russian natural gas, including via the Nord Stream pipelines, was a recent driver of price gains. Europe is scrambling to secure alternative sources of natural gas including imports of liquified natural gas (LNG) from the U.S.

However, the liquefaction facilities to convert the gas to liquid and the regasification plants on the receiving end can take years to permit and build. Much of the U.S. capacity is already under contract. But, in a March LNG export authorization, the DOE says, "The U.S. is now the top global exporter of LNG and exports are set to grow an additional 20% beyond current levels by the end of this year as additional capacity comes online."

This is where the chart is important. It shows U.S. natural gas in storage during the last two years. The gray area highlights the seasonal 5-year maximum and minimums while the dark gray line the average. The blue line shows the storage over time. During 2020, storage was at high levels. However, storage dropped to average amounts during 2021 but recently fell well below seasonal averages. We are at the beginning of the injection season which continues until fall. But, with additional natural gas being diverted to LNG exports, lower than normal storage may persist depending on summer weather. High prices may continue unless additional drilling and production comes online. More to ponder.