After a brief a rally from $1.60 per million British thermal units (MMBtu) to $3.10 per MMBtu, Henry Hub natural gas prices have crashed back toward $2 on storage concerns, BofA analysts noted in a BofA Global Research report sent to Rigzone by the BofA team today.
“The rally was partly driven by strong power burns, a return of Plaquemines LNG, a slower than expected supply response to higher prices, and an unwind of bearish spec positioning,” the analysts stated in the report.
“Since then, a return to normal weather, renewed LNG outages, and elevated production fueled a rapid retracement, with prices falling to an intraday low of $2.02 per MMBtu recently,” they added.
“The recent collapse in prices should invoke a supply response from gas basins, but we show that it can take a month or more for this to occur,” they added.
In the report, the analysts noted that warm winter weather and record supply put U.S. gas balances in a difficult position this spring. The analysts pointed out in the report that “many observers expect… end-Oct storage to exceed four trillion cubic feet early in the year”.
“However, active supply management and strong power burns more than offset Freeport outages (~130 billion cubic feet) year to date, and now rising LNG feedgas demand, a return to hotter weather, and a potential slowdown in gas basin supply should cut end-Oct storage to 3.9 trillion cubic feet and lead to a 2H24 gas price of $2.70 per MMBtu,” the analysts added.
“That said, hurricane season creates mostly bearish risks to balances and prices. Furthermore, above normal inventories constrain the market’s ability to accommodate another prolonged LNG outage in 3Q,” they continued.
The analysts also stated in the report that “several positive demand side developments could lift Henry Hub natural gas prices out of a nearly two-year rut by 2025”.
“The startup of Plaquemines LNG (09/24), Corpus Christi phase 3 (12/24), and Golden Pass (07/25) should help boost LNG feedgas demand by 3.3 billion cubic feet per day ear on year in 2025,” they added.
“Meanwhile, LNG Canada (12/24), Altamira FLNG (08/24), and Costa Azul (07/25) should boost net exports to Canada and Mexico by 0.8 billion cubic feet per day year on year. Domestic usage should fall by 0.5 billion cubic feet per day year on year, driving aggregate U.S. demand up 3.5 billion cubic feet per day year on year,” they continued.
“Meanwhile, U.S. gas production should lag, as E&Ps regroup after another difficult year, rising just 2.5 billion cubic feet per day year on year. We see end-March storage of two trillion cubic feet and end-Oct storage of 3.5 trillion cubic feet. Tighter balances present upside to 2025 prices versus the curve,” they went on to state.
In a report sent to Rigzone by Standard Chartered Bank Head of Commodities Research Paul Horsnell last week, Standard Chartered projected that the NYMEX basis Henry Hub Louisiana nearby future price will average $4.70 per MMBtu across the third and fourth quarters of 2024 and $4.80 per MMBtu overall in 2025.
In a research note sent to Rigzone last week by the JPM Commodities Research team, J.P. Morgan forecast that the Henry Hub price will come in at $2.84 per MMBtu in 2024 and $4.30 per MMBtu in 2025.
The U.S. Energy Information Administration’s (EIA) latest short term energy outlook, which was released earlier this month, projected that the Henry Hub spot price will average $2.58 per MMBtu this year and $3.42 per MMBtu in 2025.
In its June STEO, the EIA projected that the Henry Hub spot price would average $2.46 per MMBtu in 2024 and $3.24 per MMBtu in 2025.
Source: www.rigzone.com
