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Natural Gas futures/prices

17,738 Views | 141 Replies | Last: 11 mo ago by txaggieacct85
txaggieacct85
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Natural Gas prices have plummeted from almost $10 per MMBTU in August 2022 to $2.50 today.

In my thirty plus years in and around the oil and gas industry, I don't recall this much of a drop in such a short period of time.

I know winter in the US has been warmer than expected, but I wouldn't expect this much of a drop in prices on that alone.

Of course this is affecting equities for oil and gas exploration and production companies with a large natural gas play

UPDATE: $2.29 2/22/2023

Henry Hub Natural Gas Overview - CME Group
12thAngryMan
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Look no further than European gas prices. The geographic arbitrage that was available at the start of the Ukraine war meant LNG buyers were willing to pay almost any price domestically. Plus, Europe has had a mild winter too.
txaggieacct85
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The Top (and only) Natural Gas ETF (investopedia.com)

Just bought some UNG
Cody 91
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So based on the data this week UNG, BOIL and KOLD own about $3bn of AUM across those 3 ETFs, which is about 110k lots (CME. not ICE), up from 25k at beginning of year. That's an incredibly large amount of the total open interest, which of course has to roll into a contango market (pay up to keep going in the next prompt contract). Buyer of the dip beware.
Bluehazel
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The problem was the market was overly exhuberant. There is a limited amount of export capacity, so the arbitrage between US & Europe cannot be closed until there is unlimited LNG takeaway in the US (i.e. enough that Tankers stop taking loads from the US). The market was pricing as if these two markets were connected, but they aren't. Now we're back to reality and thanks to a historically warm winter, Freeport delaying delaying delaying 2% of US demand...and US producers coming back with avengeance to capture high prices gas prices came back to earth hard. Will probably be midyear / Q3 before we see a drop off in production due to lower prices. Long term outlook for natty is still strong but '23 / '24 is not looking good based on current storage levels.
techno-ag
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Gas is cheap 4 evah
txaggieacct85
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Gasoline or natural gas?
lobwedgephil
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txaggieacct85 said:

Natural Gas prices have plummeted from almost $10 per MMBTU in August 2022 to $2.50 today.

In my thirty plus years in and around the oil and gas industry, I don't recall this much of a drop in such a short period of time.

I know winter in the US has been warmer than expected, but I wouldn't expect this much of a drop in prices on that alone.

Of course this is affecting equities for oil and gas exploration and production companies with a large natural gas play


The drops in 08 and 05 were actually faster. Why they call natgas the widow maker. The big boys have started buying a bit this week, hopefully putting in a bottom.
techno-ag
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txaggieacct85 said:

Gasoline or natural gas?
TBH it feels like both. Don't mind the cheap gasoline as much although I'd prefer $100/bbl oil or so.
jagvocate
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When everything looks obvious the market makers love to pull those rugs
txaggieacct85
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Not sure how you can have $100 per barrel crude oil and "cheap" gasoline. You'll have to explain that to me
Dill-Ag13
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Assuming it's a joke. Nice job security without a massive fuel bill every month
txaggieacct85
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Nat Gas at $2.10 this morning

https://www.cmegroup.com/markets/energy/natural-gas/natural-gas.html
deadbq03
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techno-ag said:

Gas is cheap 4 evah
Pretty much this.

Increased LNG exports to Europe will help, but the bottom line is that NG is largely just a by-product of drilling for oil… so as long as oil prices and production remain high, NG is going to remain low because every time you get oil, you're almost always also getting NG.

But even at these prices, it's still profitable if done correctly… I used to work at a pure NG producer a couple years ago, and IIRC the break even for them was around $1.50, so north of that they still make money and have Capex to keep drilling.
txaggieacct85
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"NG is largely just a by-product of drilling for oil"

I've been in and around the oil and gas industry for over 35 years and I don't believe I've ever heard natural gas called a by product of oil.

There are entire companies that focus on drilling for natural gas.

The Marcellus Shale natural gas production alone turned Pennsylvania into an Oil and Gas producing state.

Natural Gas is the energy source of 38 percent of electric generation in the USA.

The problem for pricing and supply and demand is that there's an abundance of natural gas.

So its a product, not a by product


Frequently Asked Questions (FAQs) - U.S. Energy Information Administration (EIA)
deadbq03
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Yeah that's lazy, hyperbolic wording on my part, to some extent. As I mentioned, I've worked for NG producers so I'm well-aware that it's a product in its own right.

But for the big-boys of energy, the associated gas from oil wells is largely considered to be an annoying by-product. If it weren't for environmental regulations, they would rather flare it off than bother with midstream to get it to market. And the market share of NG that's from associated gas is climbing because oil prices/production are high. It's still a minority of the total NG production, but when you have a decent percentage of suppliers who honestly don't care what they sell it at because it's an annoying by-product that they'd rather flare off, that causes broader problems.

I suppose I'm more sensitive to that since I was at a Haynesville producer where we were more regionally influenced by Permian/Eagleford/Anardarko associated gas. I'm sure it's less of a problem for Marcellus Utica sales.
txaggieacct85
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ExxonMobil had $16.2 billion in natural gas sales in 2021.

I don't think they view this as an annoyance or distraction.

2021 Financial and Operating Data | ExxonMobil
ThreeFive
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A few thoughts on this post and your prior:

  • Natural gas supply is around 100 Bcfd
  • Of that, ~34 Bcfd from Appalachia, ~12 Bcfd from Haynesville, and ~16 Bcfd from Permian
  • If you're looking at pure play NG basins, you're accounting for about 50% of total supply
  • Supply from oil-focused basins will certainly affect prices, but I wouldn't say "as long as oil prices and production remain high, NG is going to remain low". We need LNG exports to increase and the gas basins to slow supply. That will absolutely matter.
  • In no world do suppliers (producers) not care what they sell gas at. It has an impact on economics
  • No one is making money at anything close to $1.50/gas given current D&C costs
txaggieacct85
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agree
CheladaAg
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Only maybe 10% of pure play NG operators have b/e's at $1.50 in the current service and material market. There needs to be a down throttle in production or we will see a lot of companies go belly up fast.
txaggie_08
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It really depends on what basin you work, because in some cases gas is basically seen as a byproduct of oil production. In the past few years in the Permian, there have been times where a company I worked for actually had to pay to get rid of their gas because they didn't want to/couldn't flare. It was worth it to pay the midstream company to take the gas so the well could continue producing oil. Some of that negative gas price is also caused by lack of capacity/restraints to get the gas to market.
DripAG08
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Any idea what Waha diff is trading at today?
txaggieacct85
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txaggie_08 said:

It really depends on what basin you work, because in some cases gas is basically seen as a byproduct of oil production. In the past few years in the Permian, there have been times where a company I worked for actually had to pay to get rid of their gas because they didn't want to/couldn't flare. It was worth it to pay the midstream company to take the gas so the well could continue producing oil. Some of that negative gas price is also caused by lack of capacity/restraints to get the gas to market.
yes it depends..

but in many cases oil is the by product and natural gas is the main product.
txaggieacct85
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In Texas in Feb 2023 there are 173,036 active oil wells and 98,790 gas wells.

Gas wells by county February 2023 (texas.gov)

Oil Wells by county February 2023 (texas.gov)


Doesnt seem like an annoyance.
txaggieacct85
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Texas Monthly Oil & Gas Production

EIA-914 monthly production report

Too much nat gas production and not enough demand with the warmer than expected winter.
topher06
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Had to drop before those hedges rolled off all the big players. For their sake, hope those guys added a year of hedges while prices didn't suck.
Brian Earl Spilner
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About to hit $2...
Cyp0111
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Pretty brutal. With diffs into almost all basins, you're running near break evens in all places not called the Marcellus.
JSKolache
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Shop your light bill around, now.
Dan Scott
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Over the last week, wind has been about 50% of the power source in Texas. Nat Gas is around 20.
topher06
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Damn, wind is such a fair weather energy source
Troglodyte
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JSKolache said:

Shop your light bill around, now.
Why are rates not dropping? I signed my renewal in June 2022 (horrible time) and my rate was 13 cents. I just checked power to choose and its 12 cents. I thought it would be bigger.
A_Gang_Ag_06
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Word is starting to filter in from operators. Rigs stacking after they finish their current pads. These are Haynesville operators I'm hearing from right now. Bout to get bumpy.
JuanDurfel
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JSKolache said:

Shop your light bill around, now.
What's the sweet spot for locking in?
My current electricity contract ends mid May.

The renewal plan they are offering is already down 0.5/kWh since they initially offered it one week ago.
I'm fairly new to this shopping process.. but I assume at some point in the spring the rate change will reverse upward.
Cyp0111
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Dude. you're sub new drill economics on 23 strip and close on 24. Rigs have to stack. Haynesville has crushed Hub.
 
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