This publication was partially created by ChatGPT AI, under request to Highlight Ten Factors That Could Drive Natural Gas Prices Below Zero in 2023.
Good or bad, y'all be the judge. But here's what ChatGPT said...
As an AI, I cannot guarantee the accuracy of such statements, but based on common knowledge, the following factors may be the reasons why natural gas prices drop below zero in 2023:
1. Growth in the use of alternative energy sources such as solar and wind energy.
2. Increasing US shale gas production, which will lead to an increase in global supply.
3. Reduced demand for natural gas due to switching to other types of fuel.
4. Increasing natural gas production in highly competitive countries such as Russia and Qatar.
5. The weakening of economic activity in various countries of the world, including China, the US and Europe.
6. Reducing inflation in various countries, which reduces the cost of natural gas.
7. A record increase in natural gas inventories caused by a reduction in demand and an increase in production.
8. Disputes between countries-suppliers and consumers of natural gas, which may lead to a decrease in exports and imports.
9. Increasing competition in the natural gas market from other producers such as Iran and Iraq.
10. Development of new technologies that make it possible to obtain energy from other sources without the use of natural gas.
Technical picture in Natural Gas Futures indicates the biggest YTD decline over the all history of Natural Gas Futures trading since early 1990x.
The main chart is adjusted for futures change All History Chart.
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06-04-2023
Natural Gas Futures Below 2 Dollars Again
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19-04-2023
Breaking The Floor
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06-05-2023
🐱 It's raining like cats and dogs 🥵 Natural Gas Futures drop SIX MONTH IN A ROW
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June 22, 2023
Still huge resistance at 3 dollar per mmBtu. Dominance is more Down.
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July 04, 2023
3... 2.... 1..........
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🤿 July 13, 2023
Let's dive, as Jacques-Yves Cousteau said 😀
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Aug 2, 2023
Natgas back, sub 2.5
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Feb 14, 2024
There are three things you can watch forever: falling natgas, falling natgas, and falling natgas 😄
I think that you are looking at the wrong side of the move here. Everyone wants to buy at the 2020 lows... just like how in 2022 everyone was going to buy the S&P at the 2020 lows...
The fundamental issue is that gas production costs have inflated substantially since 2020. At a minimum, $1.9 is the new $1.5.
Storage also does not support prices going much lower, if at all. In 2016, the storage surplus was +800 bcf and natural gas made a low near $1.8 (Feb/March) in 2016 dollars. Today, the storage surplus is a whole +350 bcf, which can be viewed as relatively even smaller because of higher supply & demand. In 2020, the year of the fabled $1.5 low, the storage level was 3,270 bcf at this time last year. Now, it is a whole 2,990 bcf. The surplus peaked in April, has been slowly declining since, and will likely be substantially lower in a few months.
The point is that the price is lower than it should be, even taking into account the historic storage surplus. I don't think you will see lower prices, even though I would also love to buy there.
Pandorra
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@roxythetradermage, Thanks for dropping up. I think there are no reasons to say AI is wrong at the moment.
1) Growth in the use of alternative energy sources such as solar and wind energy. - 100% true. FSLR is almost 100% TTM return. while AAPL and MSFT 12 months return is about 20% 2) Increasing US shale gas production, which will lead to an increase in global supply. - 100% true. U.S. Dry Natural Gas production is at the top eia.gov/dnav/ng/hist/n9070us2m.htm 4) Increasing natural gas production in highly competitive countries such as Russia and Qatar. - this is 100% true 5) The weakening of economic activity in various countries of the world, including China, the US and Europe. - 100% true. Economic activity rises just in 7 major countries this year , and 6 out of 7 are EM. 7th is Greece. 6) Reducing inflation in various countries, which reduces the cost of natural gas. - 100% true 7) A record increase in natural gas inventories caused by a reduction in demand and an increase in production. - 100% true reuters.com/graphics/UKRAINE-CRISIS/EUROPE-GAS/zdvxozxzopx/ qz.com/europes-new-energy-problem-it-now-has-too-much-gas-1850431390 And so on.. Moreover NG price is very depends on weather conditions. - 100% true. June 2023 was the warmest ever June globally on planet Earth. At just over 0.5°C above the 1991-2020 average exceeding June 2019 – the previous record – by a substantial margin.
roxythetradermage
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@Pandorra, interesting take, I appreciate your perspective...
1. alternative energy has grown, but not as much as natural gas. Per celsiusenergy.net (celsiusenergy.net/p/powerburn.html) the generation share of natural gas has been continually increasing despite investment in renewables. Electric generation is down overall in 2023, but natural gas' generation share is up.
2. It is true that production is at record highs. The natural gas rig count (leading indicator ~6months) has been dropping since April if I remember correctly. Natural gas well completions (rigs drill wells, wells produce natural gas) have yet to meaningfully decline. The issue with any bullish theory right now is that you don't see any production cuts on the top line. It has taken a while for the cuts to work their way through the system. At the end of the day, producers of natural gas aren't able to expand production because of the ""high"" breakeven cost. Legacy shale wells decline sharply and production will fall if there are fewer new wells to replace old production.
4. The international market doesn't matter a ton to US prices. There is plenty of global demand for stable, cheap, and reliable energy, e.g. when Europe storage fills up, Asia buys natural gas. 80/barrel crude oil is equivalent to about 10/mmbtu natural gas.
5. European natural gas demand has fallen something like 15% since 2022. This is because of their own energy crisis extreme measures. In general, though, natural gas demand is not nearly as elastic as oil/gasoline demand. People will talk about oil prices falling on recession fears, but the same thing doesn't really apply to natural gas. E.g. in 2020, the economic activity in the US (measured by GDP) fell 30% in Q2 2020. Natural gas demand fell by... 10%. It would quickly rebound by the end of the year.
6. Unless you have deflation in the cost to produce (depends on equipment costs, wages, etc) there is not going to be a reduction in production costs. Inflation still exists in the US (3%) and although it has been declining, it is not negative.
7. This is the main factor that has held natural gas down at these levels. EU inventories are almost full, but that doesn't matter to the US price very much. Why? Exporters can just: - ship natural gas to where there is demand (e.g. Asia) - keep liquified natural gas tankers waiting offshore for when storage isn't full/prices are higher (this happened in 2022)
"8." Weather can have an effect on natural gas. 2005-06: hurricane, price spike 2013-14: polar vortex, price spike 2018-19: cold winter, price spike 2020-21: Texas deep freeze, price spike Summer 2023: record high temperatures, record high natural gas demand (it's summer,) price falls anyway. Early projections for this winter (which are rarely that reliable) actually show a winter slightly cooler than average in North America. Hot summer = high demand. Cold winter = very high demand & can cut surplus very quickly.
But that is my opinion!
Pandorra
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@roxythetradermage, Thanks a lot for your detailed explanations. I think European LNG Deliveries was the reason and only natty pop last year, due to expectations of cold European winter. This is not happened. Now European LNG Deliveries Fall to Lowest Since Nov. 2021, Bloomberg says. That looks like a self-fulfilling prophecy. Traders opt to send LNG shipments elsewhere as price drop // Price is down as traders opt to send LNG shipments elsewhere. bloomberg.com/news/articles/2023-08-02/weaker-european-gas-prices-push-lng-imports-to-lowest-since-2021 Cheers
AMIT-RAJAN
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This is very nice use of ChatGpt nice study you shared thank you
Pandorra
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@AMIT-RAJAN, Hello Amit, and thank you very much for your kindly comments. That is very true. AI is very smart one ))
elenaec
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so where are we going from here ????
Pandorra
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@elenaec, I think sub Zero is the way. You can read more in Russian version
elenaec
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@Pandorra, well i hope we go a little bit up from here we went so much down on boil $2.6 and later on will see , i read romanian german, english but i can see the russian marks on the charts on ng
The fundamental issue is that gas production costs have inflated substantially since 2020. At a minimum, $1.9 is the new $1.5.
Storage also does not support prices going much lower, if at all.
In 2016, the storage surplus was +800 bcf and natural gas made a low near $1.8 (Feb/March) in 2016 dollars. Today, the storage surplus is a whole +350 bcf, which can be viewed as relatively even smaller because of higher supply & demand.
In 2020, the year of the fabled $1.5 low, the storage level was 3,270 bcf at this time last year. Now, it is a whole 2,990 bcf. The surplus peaked in April, has been slowly declining since, and will likely be substantially lower in a few months.
The point is that the price is lower than it should be, even taking into account the historic storage surplus. I don't think you will see lower prices, even though I would also love to buy there.