Energy News: Natural Gas Near Long-Term Support at $2 per MMBtu Are Higher Prices Expected Long-Term?

This year’s January thaw has continued into early February throughout much of the U.S., which depressed demand for Natural Gas and Electricity keeping supplies higher than normal for this time of the year. This fact in conjunction with Freeport LNG announcing it expects one of three liquefaction units at their Texas plant will be out of service for about a month due to a technical issue caused by the Arctic freeze in the middle of January has resulted in Natural Gas remaining near long-term support at $2 per MMBtu.

The shutdown of one Freeport LNG three liquefaction units will temporarily decrease the amount of Liquified Natural Gas (LNG) exported resulting in more supplies staying in storage, which will exacerbate our already elevated storage levels. But Freeport LNG is expected to be fully operational within a few weeks and the Energy Information Administration (EIA) is forecasting  the U.S. will export a record amount of LNG in 2024 and significantly more in 2025, which is a one of the major factors supporting higher Natural Gas prices long-term.

As we pointed out in our previous report, during the winter heating season, Natural Gas is very sensitive to weather changes, and as shown in the above chart, we are likely in the early stage of a Bull Market cycle in which the average price will be higher long-term; therefore, we believe it is wise to take advantage of the short-term decline caused by our recent unexpected mild weather and short-term decrease in exports due to Freeport LNG closing one of their liquefaction units.

If you have energy agreements expiring in 2024 or 2025, we recommend you take advantage of this latest short-term decline caused by this year’s January thaw in conjunction with Freeport LNG temporarily closing one of their liquefaction units, and reserve energy to be available when your present agreements expire. We believe the average price will be higher long-term, and the upside risk is far greater than the downside reward potential of waiting hoping for slightly lower prices.