Weather Outlook:
East Coast Chill: The East Coast is still experiencing stubbornly cool weather.
West Coast Warm-Up: The West Coast is starting to see warmer air building, with a potential warming trend expected in the next 2-3 weeks.
Weather Impact: Freeze-Off
Freeze-Off Concerns: Despite the frigid temperatures expected in the Eastern US this week, well-head freeze-offs are not likely to be widespread. A ridge of warmer temperatures in the West is helping to keep the coldest air from pushing too far south, with the most severe cold expected to stay north of Mississippi, Tennessee, and Kentucky.
Natural Gas Supply
Production High: Natural gas production remains high, matching last week’s output of 105.4 Bcf/d, keeping up with strong demand.
New Power Plants Impact: The rapid development of natural gas power plants could lead to lower long-term natural gas prices. However, these plants typically take 2-4 years to operational, meaning we likely won’t see the increased supply until 2028. This makes 36-48- and 60-month contracts more attractive than shorter-term 12- or 24-month options.
Natural Gas Production
EIA Natural Gas Storage Report
LNG Demand
Global Prices Surge: Prices in the UK and Europe are soaring, currently ranging from $17 to $18.
Strong Exports: This high international demand drives strong LNG (Liquefied Natural Gas) exports, remaining above 15 Bcf/d.
NYMEX 12-Month Strip
ALL ABOUT THE NYMEX TWELVE-MONTH STRIP
- The NYMEX Twelve Month Strip is the average of the upcoming 12 months of closing Henry Hub natural gas futures prices as reported on CME/NYMEX.
- A futures strip is the buying or selling of futures contracts in sequential delivery months traded as a single transaction.
- The NYMEX Twelve Month Strip can lock in a specific price for natural gas futures for a year with 12 monthly contracts connected into a strip.
- The average price of these 12 contracts is the particular price that traders can transact at, indicating the direction of natural gas prices.
- The price of the NYMEX Twelve Month Strip can show the average cost of the next twelve months’ worth of futures.
- The NYMEX Twelve Month Strip is also used to understand the direction of natural gas prices and to lock in a specific price for natural gas futures for a year.
Actionable Insights
Focus on Flexibility: Prioritize eliminating premiums and fixed pricing in your natural gas contracts. These add unnecessary costs.
Variable Strategies: Work with a variable pricing strategy to maximize flexibility. Eliminate as many premiums as possible from your contracts.
Managed Product Considerations: If discussing managed products with clients, consider hedging on-peak hours this summer or implementing a small 25-50% hedge for next winter.
