More Production Cuts
THE One Minute Energy Update for 3-5-24
#MoreProductionCuts #ShoulderSeason
***#NYMEXFlatteningOut #PG&EBasisWeakening #SoCalGasBasisWeakening #WeatherBearish #CarbonOffsetsBecomingMoreRelevant ***
***NYMEX ****– NYMEX is running hot this morning as demand increases and supply falls. Weather is driving demand. This current bull ruin should be temporary. *
***NYMEX pricing so far today - ****Open = $1.92, High = $1.95, Low = $1.89, Current = $1.91. NYMEX prices are up approximately $0.25 from 1 week ago and down approximately $1.15 from 1 year ago. *
NYMEX CALENDAR YEAR ESTIMATES* – 2024 = $2.60, 2025 = $3.50, 2026 = $3.80.*
2023 NYMEX Monthly average = $2.73. 2022 NYMEX Monthly average = $6.64. 2021 NYMEX Monthly average = $3.84. We remain well below the last 3-year averages at a 40+ month low.
*We are below the 50-day ($2.25), and above the 20-day ($1.74) and the 9-day ($1.77) average. *
RESISTANCE* – Starting @ 1.98/$2.04. *
THE PIVOT* @ $1.92.*
SUPPORT* - Starting @ $1.86/$1.80. *
BASIS* – Both PG&E and SoCal Basis prices are looking better today than even a week ago. We could see our best opportunities starting later this week once the weather returns to normal. *
*The 2023 PG&E CG First of the Month Index averaged $9.83. The 2023 SoCal CG First of the Month Index averaged $10.95. The 2023 SoCal Border First of the Month Index averaged $8.14. We remain WELL BELOW the last 3-year averages. *
***LNG ****– LNG exports fell by 7% in Feb ‘24 compared to Jan ’24 exports. The current administration continues to hit “pause” due to big donors needing to reap more margin on their climate control projects. Ever feel like you’re being played? *
PRODUCTION/SUPPLY & DEMAND* –**** ***Today’s Est. Supply = 108.3Bcf/D. Supply 7 Day Avg. = 107.49Bcf. Today’s Estimated Production = 102.7Bcf/D. Latest Demand 7 Day Avg. = 106.9Bcf/D. Today’s expected demand = 99.8Bcf. Demand is expected to be well below normal for the next 5 days.
***RIG COUNT ***– As of 3-1-24 – Second straight week of an overall rig count increase. Oil rose by 3 for a total of 506 active rigs, down 86 from 1 year ago. Natural gas fell by 1 for a total of 119 active rigs, down 35 rigs from 1 year ago. In the graph below, all that Permian production is good news for the Western region.
WEATHER* – BEARISH - NG Weather has this to say for 3-5-24 – 3-11-24, “Weather systems will impact the West w/rain, snow, and mild to cool highs of 30s-50s. Strong high pressure will rule the eastern 2/3 of the US w/highs of 50s-70s for the Midwest Northeast besides colder 20s-30s N. Plains. The central, southern, and eastern US will be nice through Friday w/highs of 50s-80s for light demand, then cooling this weekend as a weather system tracks through w/showers and highs of 40s to 60s.” 6 – 10-day* forecast = bearish. 10-15-day forecast = bearish. 3-month forecast = bearish. Summer forecast = bullish.
STORAGE* – End of Withdrawal season is expected to end up with 2,250Bcf – 2,300Bcf in storage. Bearish numbers but we’ll see how it holds up against projected production cuts. *
*CRUDE – C**urrent price = $78.73. Forward estimates: 2024 = $76.36, 2025 = $71.35, 2026 = $67.99. *****
CA RETAIL POWER* – CAISO stays just above $35MWH.*
RENEWABLE ENERGY* – Uranium mines reopen in UT, WY, TX, and AZ as nuclear becomes the clear answer for “renewable” reliability. May want to buy some uranium ETFs to offset the growing utility company transmission rates…*
***CARBON OFFSETS – ***We’re going to see a lot of carbon offsets coming out of Africa as their government finally gets serious about implementing “clean cooking” mandates/projects. If you’re looking to buy carbon offsets, our menu of carbon offsets continues to grow as we add more and more supply partners. Most companies will be mandated to curb their carbon footprint. SOME carbon offsets may be the easiest, cheapest, and most effective way to do so.
***THE BOTTOM LINE – ***Production is being cut by both EQT and Chesapeake, with more drillers expected to follow to stop prices from falling any further. However, national weather is expected to turn very bearish by Sunday. We have ample storage, so weather and storage, with a growing lack of heating demand, should outweigh the threat of production UNTIL storage levels fall back to normal /below normal due to the production cuts. We could see our best buying opportunities for Summer ’24, balance of 2024, and 12 month strips out of April ’24 over the next 15 days.
**Indicative Fixed Prices out of April ’24 **
PG&E CG SOCAL CG SoCal Border (+ $0.51 BTS)
1 MONTH $3.10 $3.40 $3.01
3 MONTHS $3.15 $3.60 $3.22
6 MONTHS $3.62 $4.48 $4.17
12 MONTHS $4.65 $5.48 $5.15
24 MONTHS $5.01 $5.78 $5.49
Summer Strip (April ’24 – Aug ‘24)
$3.52 $4.35 $3.91
Winter Strip (Nov ’24 – Feb ’25)
$6.35 $7.40 $6.99