Natural Gas: Calm Before The Storm?

In the August 1st Energy Update, I said I believe the pullback early that week was a buying opportunity as

In the August 1st Energy Update, I said I believe the pullback early that week was a buying opportunity as we entered this year’s storm season. I primarily based this recommendation on the risk factors discussed in the July 18th Energy Update, which supported higher prices this summer.

On August 4th, Freeport LNG export terminal received regulatory clearance to reopen as soon as early October, returning to service after shutting down on June 8th due to an explosion and fire. The Freeport LNG agreement with the Pipeline and Hazardous Materials Safety Administration surprised analysts as they expected a more gradual restart based on the PHMSA announcement on June 30th, which required a series of corrective actions from Freeport LNG before allowing Freeport LNG to restart operations.

This news will result in increased U.S LNG exports to Europe, and increase the risk of higher Natural Gas prices as discussed in the Aug 1st Energy Update. Natural Gas prices have increased since the announcement, but the largest price increases may still be ahead:

Thus far the Atlantic hurricane season has been very quiet, but NOAA still expects an above-normal Atlantic hurricane season as discussed in the link below:


NOAA Still Expects Above Normal Atlantic Hurricane Season


“We’re just getting into the peak months of August through October for hurricane development, and we anticipate that more storms are on the way,” said NOAA Administrator Rick Spinrad, Ph.D.

Although the hurricane season has gotten off to a quiet start, the peak of the season is Sept. 10, with the most activity happening between mid-August and mid-October, according to the Hurricane Center.

As discussed earlier, the surprise PHMSA announcement on Aug 4th will increase U.S LNG exports to Europe, which will keep U.S. Natural Gas supplies far below the 5-year average:

The three risk factors discussed in the May 31st Energy Update, are now firmly in place, and as I explained in the Mar 7th Energy Update, we are experiencing the long-term consequences of moving away from fossil fuels and towards green energy policies.

Therefore, we recommend taking advantage of the calm before the storms warned by NOAA and reserve Natural Gas and Electricity to be available when your present agreements expire. A major storm would disrupt the production of Oil & Natural Gas in the Gulf region and Natural Gas and Gasoline prices would likely skyrocket from present levels.     

But fortunately, as I explained in previous reports, Natural Gas prices are lower in the forward markets from 2023 thru 2026; and I recommend securing longer-term agreements, which include the lower prices from 2023 thru 2026. 

Also, as I said in recent reports when appropriate our consultants will also help you secure blend and extend agreements to take advantage of an even sharper longer-term pullback if and when it finally comes. The bottom line is we are living in a period of great uncertainty, and we are here to help you navigate these perilous times 

Not every client’s risk tolerance and hedging strategy are the same, but the above report will help you put into perspective the risk/reward opportunities. I invite you to call one of our energy analysts to help you plan a hedging strategy appropriate for your situation.

Ray Franklin
Senior Commodity Analyst
Energy Professionals

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